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NEW DELHI (Reuters) - At the Bengali Sweet House in the centre of New Delhi business is brisk, with its silver-covered multi-colored "barfi" sweets an indispensable treat for sweet-toothed Indians.
But co-owner Girish Aggarwal admits the silver is thinner than it used to be, as the diner-style snack restaurant tries to maintain profits in the face of soaring prices for the metal.
"We used to put five silver leaves on a batch, now we are putting on four," says Aggarwal, plumped in front of the cash register in the white-tiled dining room.
Silver prices, which averaged under 18,000 rupees per kilo in the five years to 2009, hit a peak of 73,600 rupees in April, and futures still trade around 53,000 rupees.
Demand for silver in marginal uses such as leaf, embroidery thread and traditional mirrors is highly price sensitive, said Gargi Shah, metals analyst with research company GFMS, a unit of ThomsonReuters.
The two sectors -- both pretty much unique to India -- account for about 10 percent of the country's industrial fabrication, which totaled 1,979 tonnes in 2010, GFMS said in its World Silver Survey 2011.
GRAPHIC on India's silver use: link.reuters.com/zud85s
"For example, sweets have a relatively low price point of say 200 rupees/kilo on average, but today just one gram of silver costs 50 rupees, which is a fourth of the total retail price point, and hence unviable," Shah said.
In the five years from 2005 to 2010, demand for silver leaf fell 23 percent while consumption for use in silver jari, or thread, for embroidering on saris and weaving, slid 40 percent, according to GFMS.
India, the world's largest importer of silver, bought 3,029 tonnes in 2010, double the year earlier after a weak monsoon cut demand in 2009 -- though purchases are volatile and depend a great deal on price.
"As long as the price of silver moves northwards, it will affect the use of silver in these (marginal) applications," Shah says.
Higher prices are prompting some innovative measures to extend the use of silver by mixing with cheaper metals like copper and aluminum, or simply spreading its use more thinly.
Tushar Agarwal, the manager of a wholesaler of foils in Mumbai's busy Zaveri Bazaar, says sweet makers' use of aluminum has helped bring his foil business almost to a standstill.
In a glass-fronted building in east Delhi that looks more like a shopping mall than a factory, the walls are sound-proofed against the pounding of machines which take eight hours to flatten a 20 millimeter square of silver to 160 millimeters and just 0.2 microns thick -- much finer than human hair.
For 150 sheets, sweetmakers pay 450 rupees.
Owner Piyush Singh says in some parts of India, aluminum is used in the leaf to reduce costs but he works with pure silver.
"We are not making much margin, in fact you could say we are at breakeven only," said Singh.
Aggarwal, whose father Bhim Sain founded the Sweet House a decade before India won independence from the British in 1947, says silver leaf on sweets is irreplaceable, even if it is expensive.
"It's like lipstick for a lady. If you don't have lipstick, you don't look beautiful," he said.
On the top floor of a three-storey shop in Delhi's Lajpat Nagar market, Mohit Gupta points to the tiny gold threads showing on the back of an opulent gold, silver and magenta fabric that prove it is hand-woven.
"Prices have increased 15-20 percent over seven to eight months," he says. "Sales are down 10-15 percent."
Gupta, standing out in black shirt and jeans against the peacock blues and jade green silks racked up behind him, says he doesn't see any pickup in demand while prices are high.
"I think it will be stagnant for a while, people are still waiting for reasonable prices or a fall, which isn't possible at the moment," he said.
A meter of the finest hand-woven silk can cost over 3,000 rupees and it takes 5-1/2 meters for one sari -- putting the cost of the fabric alone at a top-end monthly salary for one of Delhi's many chauffeurs of the middle classes.
"People who used to buy 10 meters are now buying 8-9 meters. You can't change the amount for a sari but maybe they will cut back on the meters for a dress instead," Gupta says.
"Clothes, jewelry and food are the most important parts of a wedding and they have all increased in cost," he added.
One way of bringing down the cost of material for wedding saris is to coat copper or aluminum thread with silver, giving a similar effect but at a much cheaper price.
"We mix aluminum with silver, otherwise the rates go really high, it goes out of budget," said Sayyed Mehtab Akhtar Rizvi, an artisan from Mumbai.
"A sari with silver work would cost about 45,000 to 50,000 rupees but if we mix aluminum with silver, the cost would come down to about 25,000 rupees," he added.
Demand is sliding and the skills required for such delicate, traditional work are disappearing -- and the consequent reduction in use of silver could be long-term.
"There are very few artisans who do this work, only the old ones. Very few new artisans learn to do pure (silver) work," said Afroz Mehndi, an artisan from Lucknow who has been working for over 30 years in the trade.
Rizvi concurs, adding that most of his work now is repairs.
"We get old saris for restoration, but very few orders for new ones ... There are very few orders for silver embroidery that we get now." ($1 = 52.9637 Indian rupees)
Additional reporting by Siddesh Mayenkar in MUMBAI and Arnika Thakur in NEW DELHI; Editing by Michael Urquhart