Why Silver Prices Are Rising in India in 2025? - Part 1

Why Silver Prices Are Rising in India in 2025? - Part 1

Traditionally Indian has chosen Gold, a precious metal, as a preferred investment instrument. However, the year 2025 is different as it has given a new unexpected hero: !!!! silver. The white metal's extraordinary rise—from $28.92 per ounce in January to more than $50 by October—delivered more than 60% year-to-date returns and has beaten almost every major asset class, including gold itself. It is not just a routine commodity rally, as conventionally believed; but it is a result of fundamental shifts in global supply-demand which have very deep repercussions for Indian investors, manufacturers, and policymakers. What led to this meteoric rise? We will dwell into this aspect in this blog.

The Numbers That Demand Attention

Before discussing the reasons of meteoric rise in prices, it is important to review certain key figures. On October 17, 2025, global spot silver prices reached all time high of $54.46 per ounce, causing unprecedented turbulence in the India's domestic markets. MCX futures and physical rates of silver were traded well above ₹1.7 lakh per kilogram breaching the historic highs. For context, in July itself, silver prices had already hit an all-time high of ₹1.15 lakh per kilogram, marking a watershed moment for the metal in India. The volatility in silver prices further exaggerated by depreciating Indian Rupee against USD which hovered around ₹88.7-88.8 in October correspondingly amplifying the silver returns.

These are not small movements. In fact, Silver's performance not only has surpassed stocks, bonds, but also even its more famous cousin, gold, turning it into one of the hottest assets of 2025. But beneath these headline numbers lies a complex story of structural deficits, industrial transformation, and monetary realignment that needs deeper examination.

The Perfect Storm: Understanding the Structural Deficit

At the heart of silver's price surge lies a basic problem that has been building for years: the global silver market is running a severe, persistent deficit. For the seventh straight year in 2025, demand continues to outstrip supply—and this isn't a temporary imbalance. The World Silver Survey 2025 signals a continued market deficit, though smaller than the prior year's shortfall, with recycling and producer supplies failing to fill the gap created by strong demand.

The cumulative shortfall from 2021 to 2025 approaches 800 million ounces—nearly 25,000 metric tons of silver. To put this in perspective, this deficit represents roughly two years of India's total silver imports under current consumption patterns. Estimates indicate a four-year global annual deficit of around 240 million ounces, which continues to widen.

The Supply Side Squeeze: Why More Silver Isn't Coming

Why isn’t supply increasing even though prices have gone up, as economic theory suggests it should? The answer lies in silver's unique production characteristics, which make it fundamentally different from most other commodities.

Unlike gold, which is primarily mined as a main product, approximately 70% of global silver production comes as a byproduct from zinc, lead, copper, and gold mining operations. This means silver supply is largely dictated by the economics of base metals rather than silver prices themselves. When copper or zinc prices don't justify new mines, silver supply doesn't increase—even if silver prices are soaring.

Surprisingly, silver mine supply has declined by 7% since 2016, even as prices have been rising. This reflects the structural challenges facing the mining industry: declining ore grades, increased environmental regulations, rising energy costs, and the long lead times required to bring new mines into production. In an era where environmental, social, and governance (ESG) considerations are paramount, opening new silver mines has become an increasingly complex and time-consuming task.

For India specifically, the supply challenge is acute. India ranks 20th among silver-producing nations, with the three main silver-producing states being Rajasthan, Gujarat, and Jharkhand. Domestic silver production is woefully insufficient to meet rising demand, making the country heavily dependent on imports—over 92% of India's silver needs are met through imports, exposing domestic prices to international market fluctuations and currency movements.

Industrial Demand: The New Dominant Force

Traditionally, silver has been viewed through the dual lens of investment demand and cultural consumption—jewelry, silverware, and religious artifacts. However, 2025 marks a decisive shift where industrial applications have become the dominant force driving silver consumption.

Industrial applications now drive approximately 58-60% of the world's total silver demand of 1.2 billion ounces. This industrial intensity fundamentally distinguishes silver from gold and creates an entirely different price dynamic. While gold functions primarily as a store of value and financial asset, silver has become a critical commodity for technological and energy infrastructure. Industrial silver consumption grew by roughly 7% worldwide in 2024, with expectations for further increases in 2025 fueled by expanding green energy and electrification projects.

The Solar Revolution: Silver Powers the Green Transition

The most significant driver of industrial silver demand comes from an unexpected quarter: the renewable energy transition, particularly solar photovoltaic panels. Each solar panel contains approximately 20 grams of silver, which serves as the conductive paste that collects and moves electrical current generated by solar cells. Silver's unmatched electrical and thermal conductivity—superior to any other material—makes it essentially irreplaceable in current solar technology.

The numbers are staggering. The EV and solar sectors alone are expected to see a 15-20% increase in silver demand from 2025 to 2030. China, the world's largest solar panel manufacturer, recorded a 70% surge in solar cell exports in the first half of 2025, with India contributing significantly to this growth.

For India, this transition carries particular significance. Under India's National Solar Mission, the government has set a renewable energy target of 500 GW by 2030. To achieve this ambitious target, India will need to install massive quantities of solar capacity, with each megawatt requiring approximately 200 kilograms of silver.

Consider the arithmetic: if India reaches even 70% of its 500 GW solar target by 2030, it would require roughly 70,000 metric tons of silver for solar installations alone over the next five years. This equals approximately 2.2 billion ounces—nearly double the global annual mine production. While not all this demand will materialize simultaneously, and technological improvements may reduce silver intensity per panel, the sheer scale of India's green energy ambitions positions it as a major structural driver of global silver demand.

Beyond Solar: EVs, 5G, and the Digital Economy

The industrial silver story extends well beyond solar panels. Electric vehicles represent another significant growth frontier, with each EV containing approximately 25-50 grams of silver in various components, from battery connections to electronics. With India targeting 30% EV penetration by 2030, the automotive sector's silver consumption will increase exponentially from current levels.

The 5G communications technology buildout is another major demand driver. 5G will double silver demand from around 8 million ounces today to 16 million ounces by 2025, with continued 5G rollouts potentially pushing this figure to over 20 million ounces before 2030. India's ongoing 5G deployment, one of the world's largest, directly contributes to this demand surge.

The electrical and electronics industry has emerged as the largest driver of industrial silver demand, encompassing everything from smartphones and computers to medical devices and defense systems. India's growing electronics manufacturing sector, bolstered by production-linked incentive schemes, is transforming the country from a silver consumer primarily for jewelry and investment into a major industrial user.

Macro Forces: The Monetary Policy Tailwind

While industrial demand provides the structural foundation for silver's rally, macroeconomic forces have accelerated the pace of price appreciation. Two macro developments have been particularly significant: expectations of easier U.S. monetary policy and a weakening U.S. dollar.

Markets began pricing in Federal Reserve easing in late 2025, with the Fed implementing interest rate cuts in September that weakened the dollar and lowered real interest rates. This pivot lowered the opportunity cost of holding non-yielding assets like precious metals. When real rates fall, precious metals—gold foremost, silver close behind—become more attractive relative to bonds and cash.

A softer dollar mechanically raises local-currency demand for dollar-priced commodities. With USD/INR trading around ₹88.7-88.8 in early October 2025, every dollar move translates into several thousand rupees per kilogram of silver. Local supply frictions, logistics, GST/taxation, and a fragmented dealer network mean Indian prices can trade at persistent premiums to international quotes.

Major banks responded to these dynamics by raising their price forecasts. HSBC, for example, revised its 2025 silver forecast materially higher in early October, reflecting continued investor interest and elevated volatility. These forecast revisions from respected institutions often become self-fulfilling, as they influence positioning among professional investors and traders.

But industrial and macroeconomic forces are only part of the story. In Part 2, we'll explore how investment demand, technical momentum, and India-specific factors created a perfect storm that sent silver prices into the stratosphere—and what this means for your portfolio, business, and India's economic future. You'll discover why the timing of this rally matters more than you think, and whether these elevated prices are here to stay or headed for a dramatic reversal.

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