Opener Beth Mooney top-scored with 61 as Australia made 161-8 in their 20 overs in the warm Birmingham sunshine.
India appeared to be on course for a shock victory when they were 118-2 in the 15th over but a clatter of wickets slowed their charge.
They still found boundaries to keep them in the hunt and reached the final over with 11 runs needed and two wickets in hand.
But Meghna Singh was run out off the second ball and Yastika Bhatia was trapped lbw the following ball.
Victory underlines the dominance of Australia’s women, who are also world champions in the 20-over and 50-over formats.
Australia had earlier looked set for a bigger total after they had rattled along to 83-1 off 10 overs.
But captain Meg Lanning was dismissed for 36 courtesy of a brilliant piece of fielding by bowler Radha Yadav, who back-flicked the ball onto the stumps to run her out at the non-striker’s end.
Tahlia McGrath was next to go, caught brilliantly by Yadav at backward point.
Australia were unable to create the momentum they wanted, losing wickets at regular intervals in the face of an impressive performance by India in the field.
Mooney was dismissed in the 18th over, the victim of a stunning catch by Deepti Sharma, who clung onto the ball one-handed as she backtracked.
India restricted to Australia to just 36 runs in the last five overs, taking five wickets.
India scored 12 off their first over in response but lost in-form opener Smriti Mandhana, bowled by Darcie Brown.
Shafali Verma (11) was caught off a skier in the third over by McGrath, who was allowed to play despite testing positive for coronavirus.
But Jemimah Rodrigues and captain Harmanpreet Kaur rebuilt the innings at a raucous Edgbaston, where most of the support was for India.
But just when India appeared to be taking the game away from Australia, Rodrigues was bowled by Megan Schutt for 33 in the 15th over, ending a stand of 96.
The following over India suffered a huge double blow when Pooja Vastrakar was caught in the deep off the bowling of Ash Gardner and Kaur was caught by wicketkeeper Alyssa Healy off the next ball for 65, leaving them 121-5.
They stayed in the hunt but it was ultimately too much and they were bowled out for 152 with three balls remaining in their innings.
In the bronze medal match earlier on Sunday, New Zealand coasted to an eight-wicket win over England.
The home side won the toss and elected to bat but could only muster 110-9 in their 20 overs.
England captain Nat Sciver top-scored with 27 and Amy Jones hit 26 but the total looked well short of par.
New Zealand raced to 46 after just four overs and shrugged off the loss of Suzie Bates (20) and Georgia Plimmer (four) to reach their target with more than eight overs to spare.
Sophie Devine, the New Zealand captain, top-scored with 51 not out off 40 balls.
© 2022 AFP