India, Malaysia Sign 11 Pacts, Push Local Currency Trade Settlement

India and Malaysia took a major step in strengthening bilateral ties on 8 February 2026, with Prime Minister Narendra Modi and Malaysian Prime Minister Anwar Ibrahim presiding over the signing of 11 cooperation agreements in Kuala Lumpur and Putrajaya.

The agreements cover multiple areas including semiconductors and disaster management and peacekeeping and digital payments and local currency trade settlement. It demonstrates a strategic transformation which leads to increased economic cooperation between the two countries.

But what will be the implications of this pact on trade, currency flows and long-term economic resilience between the two nations?

What Were The Key Agreements Signed?

India and Malaysia formalised 11 memorandums of understanding (MoUs) and cooperation pacts during PM Modi’s two-day visit – his first since the Comprehensive Strategic Partnership was elevated in August 2024.

Major deals include:

• A framework agreement on semiconductor cooperation to strengthen technology value chains and joint research.

• Agreements on disaster management cooperation between national authorities.

• MoUs covering peacekeeping cooperation and counter-terrorism collaboration.

• A pact between India’s NPCI International Payments Ltd (NIPL) and PayNet Malaysia to establish bilateral payment linkages.

Beyond sector-specific pacts, the leaders confirmed structured mechanisms for regular dialogue, including joint defence working groups, CEO Forums, and institutional track engagements to push follow-through implementation.

How Does This Push Local Currency Trade Settlement?

A central theme of the visit was advancing local currency trade and investment settlement using the Indian Rupee (INR) and Malaysian Ringgit (MYR).

Both governments welcomed collaboration between their central banks, i.e. Reserve Bank of India and Bank Negara Malaysia, to promote payment and invoicing in Rupee and Ringgit rather than relying on the US dollar.

Officials noted that bilateral trade between the two nations reached US $18.6 billion in 2025. This strong growth in trade was driven by strong demand in electronics, commodities and services.

To further maximise the trade potential, the leaders expressed confidence that expanding local-currency settlement mechanisms could reduce foreign exchange cost, mitigate volatility and improve competitiveness for exporters and importers on both sides.

Malaysia’s leadership noted that Bank Negara and RBI would fast-track operational frameworks for Ringgit–Rupee settlement, extending use beyond conventional trade to services, digital economies and possibly energy supply chains.

The approach follows dedollarisation trends because India established Local Currency Settlement Agreements with Indonesia, Nepal, and the UAE to implement Special Rupee Vostro Accounts across multiple nations.

What Other Strategic Area Did Leaders Emphasise?

Leaders underscored multidimensional cooperation across trade, security and people-to-people links:

• Defence and Security: The two nations agreed to deepen ties in defence training, maritime security cooperation and intelligence sharing. Both India and Malaysia condemned terrorism. And agreed on joint efforts against radicalisation and financing of terrorism.

• Economic Agreements: Modi and Anwar welcomed progress on the Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) and the ASEAN-India Trade in Goods Agreement (AITIGA).

• Digital, Energy, and Green Tech: Both governments pointed to cooperation in fintech via the newly discussed Malaysia–India Digital Council, renewable energy (especially large-scale solar), and semiconductor ecosystem development.

• People-to-People Connectivity: The leaders focused on expanding the mobility for workers, students and professionals, alongside tourism initiatives to drive deeper societal linkages.

What Are The Economic Data And Targets Moving Forward?

Both leaders projected a target to surpass the bilateral trade figure of 2025 materially in 2026.

Local currency trade settlement mechanisms are being actively discussed for operationalisation in 2026, aiming to lower transactional costs and FX risks.

Agreements on semiconductor cooperation and digital payments are expected to attract new investments from both countries’ private sectors and state-backed entities, though precise investment figures have not been disclosed.

Sources:

PIB

Business Standard

Times Of India