Canberra: Cruising at 277 for 1 in the 38th over chasing 349 to win, thanks to counter-attacking centuries by Virat Kohli (106) and Shikhar Dhawan (126) and their 212-run partnership, India lost 9 wickets for 46 runs in a spectacular batting collapse as Kane Richardson's maiden five-for scripted a turnaround of sorts for Australia's fourth victory on the trot.
After winning the toss and choosing to bat, Australian openers Aaron Finch and David Warner both posted big scores to take the home side to a massive 348 for eight.
The Indians looked well on target when Dhawan (126) and Kohli (106) put on 212 for the second wicket to reach 277 for one, smashing the attack all over Manuka Oval.
Neither batsman was in any trouble on a lifeless pitch and none of the Australian bowlers were spared. But once Dhawan fell cutting John Hastings to George Bailey at point, the Indian wickets began falling regularly and the Australians began to assert control.
Skipper Mahendra Singh Dhoni fell for a duck before Kohli hit a catch to Australian captain Steve Smith at mid-off, his only false shot in a magnificent 106-ball innings.
With four wickets down and in-form batsman Ajinkya Rahane hampered by split webbing on his hand, the Indians began to panic as they lost Gurkeerat Singh (5), Rahane (2) and Rishi Dhawan (9) in quick succession.
The tail enders put up little resistance and Australia took the last nine wickets for just 46 runs to wrap up an unlikely victory. "It's a funny game isn't it?" said a delighted Smith.
"It looked like they were cruising for a while there, but a couple of wickets always changes the swing of things. We had a never say die attitude tonight, which is something I want to instil in these guys.
"We worked incredibly hard to get back into that game and when we got a sniff we ran with it."
Dhoni said he took responsibility for the loss after failing to capitalise on the good start to the run chase. "That's what my job in the team is, to finish off the games from that type of position, but unfortunately I got out," he said.
"There was a bit of pressure on the youngsters but I think certainly we should have done much better. The way we started was what we needed and the partnership between Shikhar and Virat was magnificent."
Earlier, Finch made 107 and Warner 93 in a huge opening stand of 187. Smith then smashed 51 off only 29 balls and Glenn Maxwell 41 from 20 in a display of powerful shot making.
Warner brought up his 50 from 46 balls with eight fours and one six. Finch was more sedate than his partner, taking 61 balls for his half-century, but began to pick up the pace soon afterwards.
His innings was especially damaging to umpire Richard Kettleborough, who was hit on the shin by a powerful on-drive and had to be replaced in the middle by Paul Wilson.
After breaking the opening stand India took regular wickets to slow the scoring down until Maxwell let rip in the last two overs to post a target that eventually proved too much.