Alyssa Healy set the platform with a 39-ball 75 as Australia cruised to 4/184 from its 20 overs.
The standard was set from ball one with Healy hitting it for four, while India appeared to be overawed by the situation.
Healy hit seven fours and five sixes in a world beating innings that set a new mark.
Hitting her half-century off just 30 balls, it was the fastest half-century scored in the final of any ICC limited-overs competition – men's or women's – including 50-over and 20-over World Cups and Champions Trophy events.
At 1/115, Australia kept it going but couldn't continue the same pace as Healy set.
Beth Mooney anchored the innings with 78 not out off 54 balls with 10 fours, setting a new women's T20 World Cup Final best score, which was previously 66 by West Indian Hayley Matthews in 2016, beating Healy to the record.
Mooney also claimed the new record for most runs at a World Cup with 259, taking out the player of the tournament.
Mooney said "I don't have the words" when interviewed after being awarded the prize.
The score of 184 is also the biggest total in a women's T20 World Cup final, a long way on from the West Indies' 2/149 set in 2016.
It's also the highest score in a T20 World Cup final – men's or women's – and the highest women's T20I score at the MCG.
Healy was named player of the final and was said it was "unbelievable" to play in front of a crowd so big.
"I never thought I'd experience anything like that in my career," she said. "Moons and lapped up every moment we could out there and got us off to a good start which is all we could have asked."
In the field, Australia were just as sharp, leaving India 3/18 off 3.1 overs with the game as good as over at that point.
India then gell to 5/58 before Deepti Sharma (33), Veda Krushnamurthy (19) and concussion substitute Richa Ghosh (18) made it at least respectable late in the innings.
But there was no stopping the rampant Australia with Megan Schutt's 4/18 and Jess Jonassen's 3/20 leaving India in ruins.
Australian skipper Meg Lanning said the expectations were huge, especially after the first loss.
"As soon as there was 90,000 people expected on the G, we were hoping to be here," Lanning said. "Just to get here was a significant achievement but there were definitely tough times but we stuck together as a group, had each others back the whole time and such a great group to be part of."
The atmosphere at the game was something to behold with the massive crowd turning out and pouring into the stadium hours before the start of play.
Beating the 53,035 from the AFLW Grand Final last season, it's the biggest attendance at a women's sporting event in Australian history.
