Skipper Vijay Zol top-scored with a 46-ball 48 in a pathetic batting effort by the India U-19 side. Sent into bat, India were all out for 136 in 43.1 overs.
But the bowlers, led by Kuldeep Yadav's 4/13, bundled out Papua New Guinea for just 65 in 36.5 overs to emerge comfortable winners.
For PNG, Sakavai Charlie Gebai (4/26) was the best bowler.
Zol struck six fours during what turned out to be the most crucial knock at the Tracy Village.
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New Zealand had been cruising in their chase of Australia's total of 225 from 50 overs but fell short thanks to tight bowling by Fotia (5/38).
Cam Valente (2/30), Riley Ayre (1/30), Jeremy Maher (1/27) and Jake Doran (1/5) also chipped in.
Matt Short (37) and Tom Leaver (31) were the main contributors for Australia.