India Resumes Purchase of Malaysian Palm Oil

• 21 May 2020

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.
  
  • The Government of Malaysia has been working to popularize AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy) systems in Malaysia.
  • AYUSH systems are practiced in Malaysia.

Source: ET