The Koreans scored two early goals through Cheon Seul Ki (2nd minute) and Cheon Eun Bi Min (9th) to stun the Indians.
India tried hard to make a comeback in the second half and pulled through Ritu Rani's goal in the 41st minute, but the Koreans did just enough to hold on to their slender lead.
The Indians, who needed to win the Asia Cup to qualify for next year's World Cup to be held at The Hague, Netherlands, will now play China in the bronze medal play-off match tomorrow.
Starting as favourites, the Koreans, who had scored 31 goals in their three group matches, went on the offensive from the onset and shocked India by pumping in two goals through penalty corners in the first 10 minutes.
It took just two minutes for Korea to surge ahead when Cheon Seul Ki, a veteran of 71 international matches and one of the best dragflickers in Asia, converted their first penalty corner.
Seven minutes later Korea doubled their lead through Cheon Eun Bi who made no mistake from another penalty corner.
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