Eight-time national champion Ghosal, the world number 16 who entered the USD 25,000 event for gaining valuable practice for the upcoming Commonwealth Games in Glasgow later this month, had his plans upset when his Egyptian rival pulled off a 10-12 11-7 7-11 11-8 11-4 win in 77 minutes.
The victory was also the Egyptian's first over the 27-year-old Kolkata-born Indian, a quarter finalist at the last world championship as the 190th ranked Farag rallied brilliantly from a 1-2 deficit to script a stunning upset.
Farag launched a late recovery in brilliant fashion with some memorable shots as he forced the decider in which Ghosal committed a slew of errors, hitting the tin once too often.
Those mistakes by Ghosal enabled Farag take a 10-3 lead at match-ball before he completed a memorable upset to disappoint the packed gallery at the Cricket Club of India's glass-backed court.