India's silver imports rose to a three-month peak in October and are on track to hit a record this year, data from Thomson Reuters GFMS showed, as buyers opt for the precious metal instead of expensive gold to meet high seasonal demand.
More shipments by the world's top buyer may help underpin global silver prices that have slumped 37 percent so far this year - their biggest annual drop in at least three decades.
Silver imports jumped 40 percent to 338 tonnes in October from 241 tonnes in September, GFMS data showed, driven by demand during the festivals and weddings season that starts from October and tapers off by early May next year.
"By the end of the year, silver imports should be at 5,200-5,400 tonnes," said Sudheesh Nambiath, an analyst with Thomson Reuters GFMS. This would be more than India's record high purchases of 5,048 tonnes in 2008.
The country has imported 4,652 tonnes of silver in the first ten months from January, GFMS data shows.
Traditionally, gold is used for gifts at Indian weddings and festivals, but this year the metal has been made scarcer and dearer by measures aimed at cutting the country's trade deficit.
India has hiked the import duty on bullion three times this year, taking it to 10 percent, and has told importers that a fifth of their purchases would have to be turned around for export, leaving only 80 percent for domestic use.
The World Gold Council has predicted that China would topple India from its position of the world's top gold consumer this year as the strict import rules bite.
Robust silver imports by India will continue till early next year, boosted partly by high rural demand as incomes rise after a good harvest, said an official with a private silver importing bank who did not want to be named due to company policy.
Silver prices may recover to $26 an ounce or 52,000 rupees per kg by March next year on Indian demand, said Gnanasekar Thiagarajan, director with broker Commtrendz Research.
"Silver has retreated more compared to gold and while rallying higher, it would take the lead," he said, referring to international prices.
Gold is on track for its first annual loss in 13 years and is down 27 percent so far this year, lagging the drop in silver that is currently trading below $20.