The Indians, who lost 1-2 will now face the United States in the classification match for 7-8 positions.
The lone Indian victory was recorded by national champion Saurav Ghosal who defeated Davide Bianchetti in four games in the second singles after Siddharth Suchde had lost the opening tie.
In the deciding third singles, a battling Harinder Pal Singh Sandhu yielded to Amr Ramsy Swelim in five games.
Meanwhile, England, the four times winners of the title since 1995, comprehensively defeated fourth seeds Australia 3-0 and Egypt overcame France 2-1 with Mohamed El Shorbagy defeating Mathieu Castagnet in the third singles tie that lasted 91 minutes and five games.
The results:
5-8 play-off: (9) Italy beat (6) India 2-1: Marcus Berrett bt Siddharth Suchde 11-5, 6-11, 11-4, 11-0 (40m); Davide Bianchetti lost to Saurav Ghosal 5-11, 11-6, 7-11, 3-11 (51m); Amr Ramsy Swelim bt Harinder Pal Sandhu 11-9, 8-11, 11-4, 5-11, 11-8 (72m).