Having won their opening matches against Belgium and Japan, the Kiwis required only a draw to qualify for the first-leg final.
Yet they were soundly beaten by a solid Indian side, and finished third in the round robin after Belgium’s 4-1 thumping of Japan.
Belgium ultimately beat out the Black Sticks on goal difference.
India struck early in Saturday’s match in Tauranga, scoring within two minutes through Harmanpreet Singh and then via Dilpreet Singh.
The Sticks hit back late in the third quarter, with Kane Russell scoring from a penalty corner, but Manpreet Singh settled the result in India’s favour.
The Black Sticks will play Japan for third place on Sunday, with midfielder Arun Panchia admitting his side would need to improve.
“We knew it was always going to be a very tough game and India put together a good performance against us – they played well and deserved their win,” Panchia said.
“It’s a really tight series here, anyone can beat anyone on their day.”
Following Sunday’s final matches, the four sides will head to Hamilton for a second round-robin series next week.