Lower silver demand in the world's biggest consumer could weigh on prices, which have recovered almost 10 percent this year after a 36 percent slump last year, the biggest annual drop in almost three decades.
India accounts for about 20 percent of world silver consumption, mainly for jewellery, but also for investment as an alternative asset.
Imports nearly tripled in 2013 from a year earlier to a record 5,478 tonnes, spurred by curbs on gold imports and cheaper prices, but are expected to fall sharply if the government relaxes its unpopular restrictions on gold.
"People had bought a lot of the metal at lows of 45,000 Indian rupees per kilogram and now prices have increased, and with lesser gold curbs there could be a 25 percent fall in imports," said Ashok Goyal of OP Chains Ltd., a silver trader in the northern city of Agra. Silver currently sells for nearly 50,000 rupees a kilogram.
To curb a ballooning trade deficit, India last year hiked its import duty on gold to a record 10 percent, and tied domestic gold consumption to exports of gold jewellery.
But Finance Minister P. Chidambaram said last month he would keep keep the current account deficit below $45 billion as against $88 billion last year and is expected to review the gold curbs by mid-March ahead of an election expected by May.
"Silver jewellery fabricators are going slow re-stocking, and also with elections approaching the market is short of idle cash, which again points to a lower turnover of stocks, resulting in a slowdown of imports in coming months," said Sudheesh Nambiath, India analyst with Thomson Reuters GFMS.
India has almost doubled its election-spending limit to 7 million rupees per candidate in bigger states, but analysts say total spending is estimated to be much higher and most of the funds will come from illegal or "black money", which may otherwise have been invested in gold or silver.
Any easing of curbs on gold imports could remove about 2,000 tonnes of demand for silver from investors as an alternative asset, industry experts said.
Importers of the precious metal, who made only narrow margins during last year's sales boom due to abundant supply, will also look to cut costs as demand eases.
"Last year, silver business was a survival tactic for us... For most of us in the metal business it was a way to stay afloat. It was a turnover game rather than an income generator," said a senior official with a foreign bank importing silver from Hong Kong, Zurich and London.
Importers are expected to cut costs by shipping the metal by sea, rather than air, halving import costs to 5-6 cents an ounce. Silver currently costs $21.25 an ounce.