The import-export data for March released on Friday contained what may be an important macro economic development: gold imports have begun to surge. At $8.4 billion, March has seen the highest monthly tally since 2012-13, the year when gold imports touched a decadal high. Here’s the monthly tally:

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While the annual gold import tally for FY21 is a modest $34.5 billion, the Oct-March tally works out to $27.7 billion. What’s worse: each month is higher than the previous. Why $27.7 billion of import in six months is troubling? Is it reminiscent of the 2011-12 and 2012-13 years when the annual gold import bill was around $55 billion versus around $30 billion in prior years?

This huge rise in gold import bill was partly responsible for the huge current account deficit of 5.6 percent of the GDP in 2012-13 that made the rupee vulnerable to the taper tantrum.

Right now there can be no worries of a run on the rupee since the country would have ended FY21 with a current account surplus of $20-25 billion. But things can change on a dime given the rising US yields.

There is another parallel with 2011, 2012 and 2013 that is troubling. These were the years when the real interest rate was negative i.e that rate of return on savings was far lower than the inflation rate. India was running near double-digit inflation from 2011 to 2013 while the repo rate was around 7 percent. The negative real return on savings made people prefer physical savings like gold and land.

The question we need to ask now is whether savers are responding to the negative real rates by once again preferring gold over financial savings?

The RBI has kept the reverse repo rate at 3.35 percent but the overnight rate has been even lower at 3 percent for a better part of FY21 thanks to ample liquidity. Savings deposit rate of SBI has plunged to 2.7 percent while one year deposit rate is down to 5 percent. This when the average inflation through FY21 has been running at over 6 percent.

Savers and households respond in various ways to a sustained period of negative real return on their savings. They may buy gold or land or they may consume more since they lose purchasing power when they save.

The question the RBI and the MPC need to ask is if households are already reaching that threshold of resistance to negative real returns on their savings?

This resorting to physical savings can mean lesser financial savings and this in turn can push up interest rates as the government and private sector chase a declining pool of household savings.

Right now, the MPC and the RBI have to worry about the 'second wave' of COVID and the impact on growth. In addition, the RBI has to help the government with its massive borrowing programme. So neither MPC nor RBI will want to push up rates. But they will need to keep the rising gold imports on their radar. Right now growth is more important, and rising gold import is a lesser evil that can be tolerated.

Some in the bullion market say the higher gold imports may be simply due to opportunistic buying by traders, taking advantage of the fall in global gold prices and some stocking up ahead of Akshay Tritiya, the festival in mid-May which is considered auspicious for gold purchase. There may be something in this point but gold imports have been steadily rising since October. This is a signal the monetary authority can’t ignore.