Australia looks likely to lift its ban on selling uranium to India in an effort to boost relations between the two Commonwealth countries.

Prime Minister Julia Gillard will now put forward her proposal at the Labour Party annual conference in December.

She said: "It will be good for the Australian economy and for Australian jobs".

But she added: “We must, of course, expect of India the same standards we do of all countries for uranium export — strict adherence to International Atomic Energy Agency arrangements and strong bilateral and transparency measures which will provide assurances our uranium will be used only for peaceful purposes.”

Australia - which has 23 per cent of the world's reserves of uranium and is the third-largest producer behind Canada and Kazakhstan - currently exports the metal to China, Japan, Taiwan and the United States, The trade, totalling 9,600 tonnes of oxide concentrate annually, is worth over $1.1bn to the economy.

There is speculation that the removal of the ban – imposed because India has not signed up to the Nuclear Non-Proliferation Treaty, which is at odds with the ruling Labour party’s policy – has been the result of pressure from American president Barack Obama.

But Obama insisted Washington had "not had any influence, I suspect, on Australia's decision to explore what its relationship in terms of the peaceful use of nuclear energy in India might be".

"I suspect that you've got some pretty smart government officials who figured out that India's a big player and that the Australia-India relationship is one that should be cultivated”.

"I don't think Julia or anybody else needs my advice in figuring that out."

Australia's refusal to sell India uranium has been seen as a roadblock to America’s own relationship with New Delhi.

Obama said he would “watch with interest what's determined, but that this is not something about the United States and Australia, this is something between India and Australia.”

India welcomed the move with external affairs minister S.M. Krishna saying that it was an endorsement of the country's “impeccable non-proliferation credentials".

And Ms. Gillard said, the sale was justified because of a change in diplomatic circumstances around the world.

“For us to refuse to budge is all pain with no gain and I believe that our national platform should recognise that reality. So this is a significant issue for Australia that will be the subject of discussion and debate at our National Conference, but I am making my position on this issue very clear,” she explained.

India has refused to sign the NPT because it believes the treaty is discriminatory by allowing a handful of countries to retain nuclear weapons.