At 183 for four, Australia looked well on course to reach 250 in a high-pressure until the Indian spinners engineered the collapse with Jason Sangha-led side losing its last six wickets for 33 runs.
Australia, who had little hesitation in batting first, were guilty of not converting starts into big partnerships.
Merlo and Param Uppal (34) were involved in a 75-run stand for the fourth wicket before the innings' top-scorer shared 49-runs with Nathan McSweeney (23) to set the platform for a competitive total.
Earlier India's leading wicket-taker Roy (2/32) had sent back Uppal in similar fashion as offered a simple catch back to the bowler while attempting to play against the spin.
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While Indian spinners delivered under pressure in the middle overs, the pacers were impressive again upfront and towards the end.
Hitting through the line was not easy as the surface was on the slower side. The best example of that was the dismissal of openers Jack Edwards (28) and Max Bryant (14).
Kamlesh Nagarkoti (2/41), another find for India in the tournament, removed Australian captain Jason Sangha (13) that moved away just enough to take the edge to the wicket-keeper.
Nagarkoti along with Shivam Mavi (1/46) also helped in polishing off the tail after Shiva's accurate throw from deep had Baxter Bolt run out on 13.
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