Clarke, whose team defeated Pakistan by six wickets at the Adelaide yesterday to make the semis, conceded that playing India in a semi-final would be a challenge.
"They are obviously playing a lot better than they were throughout the start of the (Australian) summer. I said leading into the World Cup that I thought India were going to be an extremely tough team to beat.
"They are a very good team and because they have spent so much time in Australia, they know the conditions quite well. The game on Thursday is going to certainly be a challenge.
"We definitely have to be at our best to beat them. We look forward to that challenge," Clarke said.
India have been on a roll winning seven straight matches, in a dramatic turnaround following their winless Test and ODI tour Down Under prior to the mega-event.
"Thursday becomes our World Cup final. We look forward to it."
Pakistan skipper Misbah-ul-Haq has backed India to win the game due to lack of a "quality" spin option in the Australian line-up but Clarke thought otherwise ahead of the game at SCG, traditionally a spin-friendly wicket.
"I don't think a ball spun in our game against Sri Lanka. It will all depend on what type of wicket gets prepared. If there is a bit of grass on it, that will certainly help our fast bowlers.
"If it does spin, we've got spinning options in our squad, so I'm sure the selectors will assess that once we get to the SCG and work out what they think is the best 11," he said.

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