Both Shaun Tait and Dirk Nannes bagged three wickets apiece.
Rohit Sharma was the only Indian batsman to withstood the onslaught, finishing unbeaten on 79.
Earlier, David Warner smashed a rapid 72 as Australia piled up 184 for five.
Australia were given a blistering start by left-hander Warner and fellow opener Shane Watson (54) who put on 104 for the first wicket in 11 overs after India captain Mahendra Singh Dhoni won the toss.
Warner faced just 41 balls and struck seven of the innings's 16 sixes.
Given such a start, India did well to restrict Australia to under 200.
Left-arm spinner Yuvraj Singh (two wickets for 20 runs) checked Australia's progress. He had Warner well caught by wicketkeeper Dhoni and the duo combined again as Brad Haddin was stumped.
Off-spinner Harbhajan Singh, who started the match with a maiden, a remarkable achievement in view of what followed, conceded just 15 runs from his four overs.
But Australia's openers were severe on left-arm spinner Ravindra Jadeja, whose two overs went for 38.
Jadeja conceded six consecutive sixes, split across those two overs, with both Watson and Warner striking three in a row.
Watson, as in his 81 against Pakistan this tournament, was given an early reprieve when dropped on seven, a difficult chance, by a diving Jadeja at square leg following a miscued sweep off Harbhajan with Australia 12 without loss in the third over.
Watson, who said after his display against Pakistan he liked batting with Warner because the left-hander went for his shots from the first ball, was the one to inflict early damage this time.
He clouted Jadeja's fourth ball for six, pulled the fifth high over midwicket and sent the sixth soaring over deep backward square.
Jadeja returned for the tenth over and probably wished he hadn't as Warner flat-batted his first ball back for six over long-on.
The second ball, tossed up, was sent soaring into the gap between mid-wicket and long-on, with the third driven straighter.
Australia were running riot and their paceman received plenty of punishment too with left-arm quick Zaheer Khan, in for the injured Praveen Kumar, seeing 45 runs taken off his four overs.
Watson went to his fifty with a six off a Yusuf Pathan long-hop before he was bowled next ball to end a 32-ball innings featuring six sixes and a solitary four.
Teams:
Australia: David Warner, Shane Watson, Brad Haddin (wkt), Michael Clarke (capt), David Hussey, Cameron White, Michael Hussey, Steven Smith, Mitchell Johnson, Shaun Tait, Dirk Nannes
India: Gautam Gambhir, Murali Vijay, Suresh Raina, Yuvraj Singh, Mahendra Singh Dhoni (capt/wkt), Yusuf Pathan, Rohit Sharma, Ravindra Jadeja, Harbhajan Singh, Zaheer Khan, Ashish Nehra
Umpires: Billy Doctrove (WIS), Billy Bowden (NZL)
TV umpire: Ian Gould (ENG)
Match referee: Ranjan Madugalle (SRI)