Electing to bat first, the Kangaroos made 166 for five in the stipulated 20 overs, thanks to the innings of 76 by skipper Ricky Ponting.
However, the four time World champions never looked in a commanding position to win this match, as the Indian batsman always maintained the scoring rate, thanks to a 'serious' knock by Gautam Gambhir of 63, who was adjudged Man of the Match and thus winning a Maruti car.
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It may be recalled that Gambhir had also laid the foundation for India in the recently-concluded Twenty20 final against Pakistan by scoring 75 in South Africa.
In the recently-concluded one-day series, Australia thrashed India 2-4. But in T20 Future Cup match, India lived up to their world champions tag of the Twenty20, finishing with a thumping seven-wicket win in Mumbai.
Gambhir who had scored fifties against New Zealand, England, Pakistan and Australia. In the recently concluded twenty20 world cup, has been India's most valuable batsmen in the shortest format.
Gambhir set the agenda in an emphatic manner, partnering with Robin Uthappa and Yuvraj Singh in rollicking stands.
Australian bowlers had a tough time -- the 24 extras indicated as much -- and all conceded seven or more runs an over. Brett Lee was shredded to the tune of 20 runs in his sixth over, when the total went from 30 to 50, and Australia never recovered.
Over-throws and a wicket off a no-ball typified their day and there was really nothing that went their way in front of a raucous crowd.
Gambhir fell when 24 more runs were still needed. Robin Uthappa's blistering 35, including six fours, went well with the fireworks illuminating the Mumbai's skyline.
Virender Sehwag managed just 5 on his return, but Yuvraj Singh swung India to the finish. He was awarded for hitting maximum sixes among both the teams. Harbhan Singh who gave just 17 runs in four overs and took a wicket, was adjudged best bowler.
Ben Hilfenhaus, playing his first match of the tour, and Michael Clarke were the most effective bowlers, but the fast-bowling trio did not have much impact.
The triumphant Indian team took a round of the entire stadium by sitting on the car.
Earlier, Ricky Ponting played a captain's knock of 76 in 53 balls and helped Australia to reach a respectable score of 166 for five in 20 overs. After electing to bat, opener Adam Gilchrist in his usual style started scoring in the first over of R P Singh hitting two consecutive fours, but lost his stump on the fifth delivery when the score was 12.
Ponting and Hyden then put up 52 runs partnership before Hayden was bowled by Harbhajan Singh on 17.
Andrew Symonds, hero of recently-concluded one day international, could not make much effect as he was run out by Harbhjan and Yuvraj Singh combine when the score was 110.
Brad Hodge was bowled by Irfan Pathan when the score was 116.
At this stage, Ponting was joined by Michael Clarke and they together put up 42-run partnership before Ponting was bowled by Pathan.
However, Murali Kartik, the left arm spinner playing his first T20 match restricted the batsman, but, S Sreesanth was expensive, giving 47 runs in his four overs.