Australia scored through captain Jamie Dwyer (fifth and 18th minutes) and Kieran Govers (42nd) after enjoying territorial domination against the Indians, who were often forced to fall back and defend against the rampant rival strikers.
Australia stayed on course for their fifth successive title, setting up a final against Olympic silver medallists Netherlands, who outplayed Pakistan 5-2 in the other semifinal.
India's Cinderella run came to an end, but they stay in contention for their first Champions Trophy medal in three decades. India will take on Pakistan, in a sub-continental clash tomorrow for the bronze medal.
India's only Champions Trophy medal, a bronze, came in 1982. Pakistan edged past India to claim bronze medals for three successive years from 2002-04.
Playing a fast dominant game, Australia today pressed the accelerator from the beginning and forced their first penalty corner in the second minute, but Christopher Ciriello's rising shot was ruled as a foul for going into onrushing defender's body.
Dwyer opened the scoring in the fifth minute, capitalising on a rebound during Australia's second penalty, after Ciriello's drag-flick was blocked by a defender.
The Aussies increased the lead in the 18th minute by converting a penalty stroke, which was awarded when a foul was committed on Dwyer in a scoring position.
Dwyer had already taken two shies. The first one was blocked by goalkeeper TR Potunuri and the second shot rebounded back into play off post.
India opened up to mount a few raids midway through the first session, but did not cause much trouble to the Australian defence.