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International Relations

India Resumes Purchase of Malaysian Palm Oil

  • 21 May 2020
  • 3 min read

Why in News

Recently, India has resumed purchases of Malaysian palm oil after a gap of four-month following a diplomatic row between the two countries.

Background

  • The former Prime Minister had criticised India's Citizenship Amendment Act (CAA) which was considered as an interference in the internal matter of India.
  • Subsequently, the diplomatic row emerged between the two countries.
  • Following the incident, India imposed a ban on imports of palm oil from Malaysia.
  • The renewed purchases come amid improving trade relations between India and Malaysia after the formation of a new government in Malaysia.
    • India's total palm oil imports from Malaysia for the first four months of 2020 fell by more than 50% from the same period in 2019.

Key Points

  • India's Palm Oil import:
    • India is the world’s biggest buyer of edible oils.
    • India buys more than two-thirds of its total edible oil imports as palm oil.
  • Malaysian Import over Indonesia:
    • Malaysia is the world's second largest producer of palm oil after Indonesia.
    • Malaysia's palm oil inventories production has surged and coronavirus lockdowns led to a slump in demand.
    • Thus, Malaysian palm oil is available at a discount price compared to supplies from Indonesia. On the other hand, Indonesia has also raised its palm oil export levy.
    • Additionally, Malaysia has also signed a deal to buy 100,000 tonnes of Indian rice.

India-Malaysia Relation

  • India established diplomatic relations with Malaysia in 1957.
  • Economic Relation: India and Malaysia have signed Comprehensive Economic Cooperation Agreement (CECA). CECA is a kind of Free Trade Agreement (FTA).
    • India has also signed the Free Trade Agreement (FTA) in services and investments with the 10-member Association of Southeast Asian Nations (ASEAN).
      • Malaysia is the third largest trading partner in ASEAN.
    • Bilateral trade between India and Malaysia is significantly biased in favour of Malaysia.
  • Defence & Security Cooperation: Joint military exercises “Harimau Shakti” are held annually between the two countries.
  • Traditional medicine: India and Malaysia have signed a MoU on cooperation in the field of Traditional Medicine in October 2010.

Source: ET

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