India is facing a significant silver shortage in the lead-up to Diwali, a period traditionally marked by heightened demand for the precious metal. A sharp 42% drop in silver imports between January and August 2025, totaling just 3,302 tons, has exacerbated the situation, even as investor interest has surged. This shortage is occurring against a backdrop of already strained global supplies, sending local premiums soaring and compelling some Exchange Traded Funds (ETFs) to halt new subscriptions.
The price of silver in India is currently trading at a steep premium, exceeding global prices by as much as 10%. This surge is attributed to robust festive and investment demand that is straining the already tight global silver supply. Jewelers are reportedly struggling to fulfill orders as Diwali, a peak season for silver purchases, draws near. Some bullion traders are quoting premiums of ₹2,000–3,000 per kilogram for immediate supply.
Several factors have contributed to the global silver shortage. The silver market has been in a deficit for the past four years, depleting surplus stocks. In 2025, silver supply continues to lag behind demand, with approximately 70% of silver production occurring as a by-product of mining other metals, which limits output flexibility. Simultaneously, industrial usage of silver has increased sharply, particularly in the renewable energy and electronics sectors. The inclusion of silver on a draft list of critical minerals by the U.S. has further intensified the situation, prompting a surge in shipments to the U.S. and tightening global availability.
India, the world's largest silver consumer, relies on imports for over 80% of its silver needs. Strong inflows into silver ETFs and high demand for coins and bars have further depleted domestic reserves built up in 2024. Normally, elevated local premiums would incentivize banks to import more silver. However, supply constraints from major producers, robust global demand, and logistical challenges have restricted shipments. Lease rates in London, reflecting the cost of borrowing physical silver, have climbed to over 30%, indicating extreme market tightness.
Indian silver ETFs experienced record inflows of ₹53.42 billion in September, but faced high premiums when acquiring physical silver, leading to temporary suspensions of new subscriptions. The shortage has made it difficult for manufacturers to produce silverware, and popular festive items like silver coins and bars are trading at high premiums. As investors anticipate further price increases, many are hesitant to sell their silver holdings, resulting in tight scrap supplies.
The surge in silver prices has significantly outperformed gold in 2025. Domestic silver prices have soared by 53% this year, compared to a nearly 49% increase in gold prices. This has led to a surge in investment inflows into silver ETFs, reportedly tripling those into gold ETFs. Global demand for silver-backed ETFs has been strong, with total additions reaching approximately 95 million ounces in the first half of 2025 alone, exceeding the entire inflows of 2024.
Experts suggest that the current valuation of silver is significantly above its typical range for this time of year. The rally has been fueled by a combination of festive buying, investor speculation, and momentum trading. Financial advisors are cautioning against entering the market at these inflated levels, suggesting that the risk-reward ratio is currently unfavorable for new entrants. They recommend limiting exposure to precious metals to about 10–15% of one's portfolio and focusing on long-term growth assets.
As Diwali approaches, the bullion industry is witnessing overwhelming demand, with gold and silver coins and bars in short supply. Jewellers face waiting periods of up to one week to procure silver from suppliers. Despite record-high prices, the industry expects record sales this Diwali, driven by consumer and investor "fear of missing out" (FOMO). While jewellery sales may be impacted by higher prices, the sale of coins and bars is expected to compensate.
The silver shortage in India is a multifaceted issue stemming from reduced imports, increased investment demand, global supply constraints, and rising industrial consumption. As international supply stabilizes and premiums cool, investors and jewelers may continue to face challenges accessing physical silver at reasonable prices.
