This was India's second loss in three days, having being stunned by Nepal in the first match.
Bangladesh emerged victorious after they chased down the target of 188 with eight wickets and four overs to spare.
The defeat meant Bangladesh and Nepal, from Group A, will join Pakistan and Afghanistan respectively in the semi-finals.
Rainy conditions had reduced the match at the Royal Selangor Club, India's third venue in three games, to 32 overs a side.
Without two of their key batsmen in Prithvi Shaw and Shubman Gill, the Rahul Dravid-coached India couldn't manage a single half-century, with Salman Khan's unbeaten 39 being the highest.
Two others - Harvik Desai (21) and Anuj Rawat (34) - wasted starts. The last four wickets added 71 to in the must- win game.
Bangladesh's opening pair of Pinak Ghosh and Mohammad Naim Sheikh provided a solid 82-run partnership to dash India's hopes.
Ghosh then combined with Mohammad Tawhid Hridoy to take his side to victory with an unbroken 83-run stand for the fourth wicket.
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