India's coach Roelant Oltmans, however, wasn't ready to concede defeat easily.
For the record, both teams have met in the preliminary Group A match in June 16 which saw Argentina won 5-2. If they win, they will face the victor of the match between China and Canada on Sunday.
Despite losing to Netherlands, India and Canada, the green-shirts qualified for the quarterfinals after Canada and Scotland drew 1-1 on Tuesday.
However, Rahim sealed victory for Malaysia in the final quarter when he converted a penalty corner. Both sides lost their quarterfinals matches and will vie for a better finish as the tournament reaches its business end.
The South Asian rivals will be playing for the fifth/sixth positions in London on Saturday.
India had 27 circle penetrations to Malaysia's 16, but they were able to convert that only to 10 shots and just three penalty corners.
North Korea does it again, conducts another rocket engine test
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Malaysia has always been a thorn in Indian hockey team's flesh and so it proved it again.
The two Indian goals were scored by Ramandeep Singh. There were too many balls that were being crashed in with hope rather than imagination, which meant the individual skills of players like Akashdeep Singh, Mandeep Singh, SV Sunil and Talwinder Singh were not utilised often enough.
After a goalless first quarter, Malaysia opened the scoring with a penalty corner by Razie Rahim in the 19th minute. It didn't help India's cause with Malaysia winning another PC in the 57th minute but Razie Rahim's flick went far wide.
Pakistan's performance graph, while still lower than that of India, has been on the upswing. "I am also pleased with the way our defence stood up to the challenge especially the goalkeepers who were probably facing the Dutch side for the first time since they came into the senior squad", expressed Oltmans.
Meanwhile, in other matches of the day, Canada and China will lock horns in 5th-8th classification match while Argentina will play Malaysia in the first semi-final followed by the second last-four clash between hosts England and Netherlands.