Skipper Vijay Zol top-scored with a 46-ball 48 in a pathetic batting effort by the India U-19 side. Sent into bat, India were all out for 136 in 43.1 overs.
But the bowlers, led by Kuldeep Yadav's 4/13, bundled out Papua New Guinea for just 65 in 36.5 overs to emerge comfortable winners.
For PNG, Sakavai Charlie Gebai (4/26) was the best bowler.
Zol struck six fours during what turned out to be the most crucial knock at the Tracy Village.
New Zealand had been cruising in their chase of Australia's total of 225 from 50 overs but fell short thanks to tight bowling by Fotia (5/38).
Cam Valente (2/30), Riley Ayre (1/30), Jeremy Maher (1/27) and Jake Doran (1/5) also chipped in.
Matt Short (37) and Tom Leaver (31) were the main contributors for Australia.
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