Modi, Malaysian PM discuss cooperation in trade, defence, semiconductors
India and Malaysia held bilateral talks on the sidelines of the 18th BRICS Summit in New Delhi, covering trade, investment, defence, semiconductors, infrastructure, and the digital economy.
The discussion built on an earlier bilateral meeting held in Putrajaya, Malaysia, in February 2026, where the two governments had signed a set of agreements covering strategic sectors including workforce development, innovation, and supply-chain resilience.
Both sides reaffirmed intent to deepen semiconductor-sector cooperation, alongside continued discussion on fast-tracking review of the existing ASEAN-India Trade in Goods Agreement (AITIGA) and strengthening the bilateral Comprehensive Economic Cooperation Agreement (CECA).
Defence cooperation was flagged for further expansion, building on an existing framework of joint military exercises between the two countries' armed forces.
India-Malaysia CECA (2011) and the AITIGA Review
The Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA/CECA) was signed on February 18, 2011, and entered into force on July 1, 2011. It is a comprehensive bilateral pact covering trade in goods, trade in services, investment, and movement of natural persons — going beyond a standard Free Trade Agreement (FTA) by including services and investment chapters. Separately, India also engages Malaysia multilaterally through the ASEAN-India Trade in Goods Agreement (AITIGA, 2010), which is currently under a joint review process to update tariff schedules and address rules-of-origin concerns raised by Indian industry.
Key Details
- CECA signed: February 18, 2011; entered into force: July 1, 2011
- CECA is broader than a plain FTA — covers goods, services, investment, and movement of natural persons (Mode 4)
- AITIGA (ASEAN-India Trade in Goods Agreement) signed 2009, in force January 2010; a review was launched to address concerns over misuse of tariff concessions and rules of origin
- India's Commerce Ministry held talks with Malaysia's Ministry of Investment, Trade and Industry in July 2025 specifically on fast-tracking the AITIGA review and strengthening CECA
The 2026 discussion on "strengthening cooperation in trade" is a continuation of this ongoing CECA-strengthening and AITIGA-review track, rather than a new initiative — useful for distinguishing bilateral CECA-level commitments from India's multilateral ASEAN-wide trade obligations.
Bilateral Trade Profile — India-Malaysia
India and Malaysia's bilateral trade has grown steadily, with Malaysia serving as one of India's key ASEAN trading partners, particularly for palm oil imports and petroleum-product/electronics exchange. Malaysia is also a significant recipient and source of Indian services and investment flows within ASEAN.
Key Details
- Bilateral trade was valued at roughly $13 billion for FY26 (April-November 2025 period)
- India's key imports from Malaysia include palm oil and palm oil products, electronics, and petroleum products; key exports include refined petroleum, chemicals, and machinery
- Malaysia is part of ASEAN, with which India has both the AITIGA (goods) and a broader ASEAN-India strategic partnership dating to 1992 (sectoral dialogue partner), upgraded to full dialogue partner in 1995, and Comprehensive Strategic Partnership status (2022)
Trade-figure and agreement-hierarchy questions (CECA vs AITIGA vs ASEAN dialogue partnership) are a recurring UPSC Prelims pattern for bilateral/regional agreements — this bilateral meeting sits at the intersection of a country-specific CECA and India's broader ASEAN commitments.
Semiconductor Cooperation and the India Semiconductor Mission (ISM)
India's push for semiconductor cooperation with Malaysia connects to the India Semiconductor Mission (ISM), the nodal government programme for building domestic chip manufacturing and design capacity. Malaysia is a globally significant hub for semiconductor assembly, testing, and packaging (ATP) — distinct from front-end fabrication — making it a natural partner for supply-chain diversification and skills cooperation rather than fab-level competition.
Key Details
- India Semiconductor Mission (ISM) established under the Digital India corporation framework in December 2021, with the original scheme outlay of ₹76,000 crore (2021) to support fabs, display fabs, and ATP/OSAT units
- ISM 2.0 was announced in the Union Budget 2026-27, with a stated focus on semiconductor equipment/materials production, indigenous IP design, and supply-chain resilience; a Rs 1,000 crore allocation was earmarked for ISM 2.0 in FY2026-27 for industry-linked research and training centres
- Malaysia accounts for a significant share of global semiconductor assembly, testing, and packaging (ATP) capacity, historically making it one of the top hubs in this back-end segment of the value chain
- The two countries' semiconductor cooperation announced in February 2026 (Putrajaya) covered workforce development, innovation, and supply-chain stability — complementing rather than duplicating India's own front-end fab investments under ISM
Semiconductor cooperation questions increasingly test the value-chain distinction (design vs fabrication vs ATP/OSAT) — Malaysia's strength lies in ATP, which is precisely the segment India is seeking to diversify into and partner on, distinct from its own front-end fab ambitions under ISM.
Defence Cooperation Framework
India-Malaysia defence ties rest on a bilateral Memorandum of Understanding on Defence Cooperation signed in 1993, which provides the legal basis for cooperation including joint ventures, procurement, logistics support, and training exchanges. The most visible manifestation is the annual joint military exercise Harimau Shakti, conducted between the two armies.
Key Details
- Defence Cooperation MoU: signed 1993 — the foundational bilateral defence instrument
- Exercise Harimau Shakti: an annual India-Malaysia army exercise conducted since 2012, alternating venues between the two countries; focused on counter-terrorism and counter-insurgency drills, including cordon-and-search and heliborne operations, under a UN Chapter VII framework orientation
- The two armed forces have conducted multiple joint exercises over the preceding five years as part of steadily deepening defence engagement
The reference to expanding "defence cooperation" builds on this established MoU-and-exercise framework rather than representing a new defence relationship — a useful example of the distinction between a foundational bilateral MoU (1993) and the recurring joint-exercise mechanism it enables (Harimau Shakti, since 2012).
- India-Malaysia CECA: signed February 18, 2011; in force July 1, 2011
- Bilateral trade (FY26, Apr-Nov 2025): approximately $13 billion
- AITIGA: signed 2009, in force January 2010; currently under joint review
- India Semiconductor Mission: launched December 2021, original outlay ₹76,000 crore; ISM 2.0 announced Budget 2026-27 with ₹1,000 crore FY2026-27 allocation
- India-Malaysia Defence Cooperation MoU: signed 1993
- Exercise Harimau Shakti: annual joint army exercise since 2012
- Prior bilateral meeting on these themes: Putrajaya, Malaysia, February 2026