Since the tie was already decided in favour of the host, which had taken an unassailable 3-0 lead, India fielded Balaji in place of Ramkumar Ramanathan.
Serbia also changed the nomination, playing Krstin in place of Dusan Lajovic.
Balaji, who is more focussed on the doubles, lost 3-6 1-6 in 66 minutes on indoor clay courts at the Kraljevo Sports Venue.
The two sides agreed not to play the fifth rubber. “It was not a bad match for me. In every service game I had game points but I was not sharp enough to take them. Even most of the return games were close. The scoreline look easy for him but we had long games,” Balaji said.
“Before going into the tie, we thought we had a chance of beating them. But they came up strong in every match.”
Serbia did not have multiple Grand Slam winner Novak Djokovic and injured Filip Krajinovic in its line-up but still India could not take advantage of it.
India now has lost four out of five meetings with Serbia, whom it had defeated way back in 1927 when the country was Yugoslavia.
Since new Davis Cup reforms have been introduced, India will not have to go back to the Asia/Oceania Group immediately.
Instead, India will compete in a 24-team qualifying event (home and away format) in February next year to qualify for the 18-team Davis Cup Finals. The year-end event to crown Davis Cup champion will be held either in Madrid or Lille from November 18-24, next year.
The 12 winners will qualify while four semi-finalists from the 2018 season will get direct entry. The ITF will award two wild cards for the inaugural Davis Cup finals. The Indian team is ranked 20th but effectively it is 16th, considering that four semifinalists will not be part of the qualifying event.