Australia produced their best show of the tournament and scored through Lachlan Sharp (6th minute), Tom Craig (15th) and Trent Mitton (33rd) to secure full points.
The Indians, however, did not give up and fought till the end, scoring through Varun Kumar (10th) and Harmanpreet Singh (58th), producing a nail-biting finish.
The loss meant India slumped to third spot in the standings with six points from two wins behind hosts Netherlands (6 points), while Australia climbed to the top with seven points from three games.
The top two sides after the round robin stage of the six-team event will play in the fina of the tournament on Sunday. India will next play Belgium tomorrow.
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