Silver imports into India, the biggest consumer of the white metal, are likely to decline up to 27 percent this year on expectations of volatile prices, despite import duty remaining unchanged, the head of the country's biggest bullion importer said on Monday.
Sunil Kashyap, head of Asia at Scotia Mocatta, a unit of Bank of Nova Scotia, said investors in India were averse to steep and volatile changes in prices of silver, which could dent imports. Silver imports are likely to fall to 3,500-4,000 tonnes in 2012, down from 4,800 tonnes imported last year, Kashyap said.
The federal government, in its annual budget in March, kept the import duty on silver unchanged at 5 percent on value. It abolished the excise duty on silver, often considered as poor man's gold. Silver prices have risen 112 percent since 2009. The budget, however, doubled the import tax on gold to 4 percent of value, which led to a prolonged shutdown by jewellers who have urged for a rollback of the duty.
"Import taxes increase the cost of (the yellow) metal to the final consumer and so the higher price may dampen demand for 2012," said Kashyap. Gold imports could fall 38 percent to 600 tonnes in 2012, he said. Scotia is the largest bullion importer in India, with about 35 percent marketshare. The bank operates in collaboration with wholesalers across the country.