Raj's side looked on course to lift the trophy for the first time at 191 for three, chasing 229 for victory, in Sunday's final at the 'home of cricket'.
But on the same Lord's ground where India's men had won an inaugural World Cup title back in 1983, they lost their last seven wickets for just 28 runs to be bowled out for 219 with eight balls to spare.
Anya Shrubsole did the damage with a late burst of five wickets for 11 runs in 19 deliveries. The pace bowler's match haul of six for 46 was also the best individual return in any Women's World Cup final.
Pressure got to India in the end, but the 34-year-old Raj, who later confirmed this has been her last World Cup appearance, said that would be less likely to happen if they had a tournament to match Australia's Twenty20 Women's Big Bash League or England's equivalent Super League.
"Everybody was very nervous and I think that resulted in our defeat," Raj, the all-time leading run-scorer in women's one-day internationals told reporters.
England's women have been full-time professionals for some two years now, with Raj's side still on their way — although the squad did receive bonus payments of 50 lakh Indian rupees (£60,000) each for reaching the final from the Board of Control for Cricket in India.
"These girls have really set the platform for the upcoming generations in India," said Raj.
"They’ve opened up the channels for women’s cricket and they should be really proud of themselves. I have seen the changes the girls have made. Unlike 2005 (when Australia hammered India by 98 runs in the final at Centurion, South Africa), this went to the end."
India's collapse was sparked by Punam Raut's exit for 86, the top score of the final. Together with Harmanpreet Kaur, who made 51 after her astounding 171 not out in India's semi-final win over reigning champions Australia, the opener shared a third-wicket stand of 95.
"We messed it up in the end. It was a very brave innings from Punam," said Raj.
But the skipper said her side had established a solid foundation for women's cricket in India, the sport's financial superpower.
"The response from the public is very positive," said Raj. "I'm sure the BCCI is very proud of the team. When we lost to South Africa and Australia (in pool play), no one thought we would get to the final. A team like that has come to the finals and given a good fight to the home team. The WBBL has given exposure to the two girls who have played (Smriti Mandhana and Kaur). If more girls participate in such leagues, it will give them experience and help them to improve their own game. If you ask me, they should have (women's) IPL because now is the right time to create that base."
England, beaten by India in their opening pool match, also made plenty of mistakes in the error-strewn closing overs on the way to winning a fourth World Cup title and third in as many editions on home soil.
But in a year where former England captain Rachael Heyhoe Flint, the driving force in establishing the inaugural Women's World Cup in 1973 — which her side won — died and on a match day where the bell to signal the start of play was rung by 105-year-old Eileen Ash, the oldest living former England women's international, the hosts held their nerve.
"Cricket's a funny game, and pressure's a funny thing," said England captain Heather Knight after a win greeted with the sound of thousands of girls cheering in the stands of a capacity crowd rather than the polite applause usually associated with Lord's.
"It's a World Cup final, we knew if we held our nerve we would be in with a chance but it did feel like it was slipping away at 190 for three.
"But we fought like hell in this tournament and today was no different."
BBLbcciHarmanpreet KaurICC Women's World Cup 2017India vs England Finalipljhulan goswamimithali rajsmriti mandhanaWomen's World Cup final
First Published: July 24, 2017, 8:37 AM IST