Electing to bat, the Indian women were comfortably placed at 63 for two midway into their innings before captain Mithali Raj's dismissal triggered a collapse. Thanks to the collapse, the team could post just 104 for eight in 20 overs at the Galle International Stadium.
Australia chased down the target of 105 in 17.2 overs with opener Meg Lanning top-scoring with a 50-ball 39 in the Group A match. Jess Cameron chipped in with a quick-fire 32-ball unbeaten 36 as Australia scored 105 for two.
India lost openers Amita Sharma (11) and top-scorer Poonam Raut (21) in the fifth and seventh overs respectively, but were still in a good position to put up a fighting total as
they were 62 for two at the halfway mark.
But Mithali's (18) run out in the first ball of the 11th over triggered a collapse and by the 14th, India were 73 for five, adding just 10 runs in 3.5 overs at the expense of three wickets.
Nagarajan Niranjana (15 off 14 balls) saved India some blushes with a quick 25-run partnership with Mona Meshram (7), taking the team close to the century mark.
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But then again, India lost three wickets for just seven runs in the last two overs, as they slumped from 97 for five to 104 for eight.
Off-spinner Erin Osborne picked up three Indian wickets for 13 runs while pacer Julie Hunter and left-arm spinner Jess Jonassen chipped in with 2/23 and 1/6 respectively.