Prime ministers of India and Malaysia sought to reset relations between the two countries on Tuesday as they agreed to boost trade, movement of workers and the use of their own currencies to settle bilateral transactions.

Malaysia is home to nearly 3 million people of Indian heritage, but relations soured around late 2019 following remarks by largely Muslim Malaysia's then-Prime Minister Mahathir Mohamad against New Delhi removing the autonomy of India's only Muslim-majority region Kashmir.

That had also hit purchases of Malaysian palm oil by India, the world's biggest buyer of edible oils like palm.

But the Malaysian approach has changed under Prime Minister Anwar Ibrahim, who took office in 2022 and previously told Reuters he was keen to have good ties with India.

The two countries started settling trade in their own rupee and ringgit currencies in April last year, and India's palm oil imports from Malaysia has also increased.

"With the support of Prime Minister Anwar Ibrahim, there has been a new momentum and energy in our partnership," Modi said, as Anwar stood by his side during his first visit to New Delhi as prime minister.

"Today we have decided that our partnership will be elevated to a 'Comprehensive Strategic Partnership'. We believe that there is still a lot of potential in economic cooperation. Bilateral trade and investment should be expanded."

Modi noted that Malaysia had invested $5 billion in India in the past year and identified semiconductors, financial technology, the defence industry and artificial intelligence as areas of possible cooperation.

Anwar said his country would reinvigorate relations with India in all fields and that their potential had not been tapped in the past few years.

Indian foreign ministry official Jaideep Mazumdar told a press conference the country would make a one-off export of 200,000 metric tons of non-basmati rice to Malaysia, making an exception to a ban on such shipments.

Mazumdar said India is also keen to sell defence equipment to Malaysia, as well as aircraft manufactured by state-run Hindustan Aeronautics Ltd.

The two countries also agreed a framework for the welfare of Indian workers going to Malaysia, which sources labour from some 15 countries including India for its palm plantations and other industries.

There are already some 140,000 Indian workers in Malaysia, the highest ever, and this total could rise as India seeks job opportunities for people at home and abroad.

(Reporting by Krishna N. Das in New Delhi; Additional reporting by Tanvi Mehta and Mayank Bhardwaj; Editing by Shri Navaratnam and David Holmes)