My MacBook Air M1 2yrs old with 349 battery cycle count... Battery health dropped to 81%.

That Mac's battery is functioning normally. Please read Check the condition of your Mac laptop’s battery - Apple Support.

I wonder how Apple claims 1000 cycles to get to 80% of battery health.

I am unable to find any source for that claim, other than the following excerpt from the link below:

"Your battery is designed to retain up to 80% of its original capacity at 1,000 complete charge cycles."

That is not what you stated, "... Apple claims 1000 cycles to get to 80% of battery health."

That Mac battery's Maximum Capacity may remain at 81% for a long time, or it may increase, or it may decrease from one charge cycle to another.

None of that alters the fact the battery is designed to retain up to 80% of its original capacity at 1,000 complete charge cycles.

Kindly help me with some solutions and what will it cost to replace the battery for MacBook Air M1 in India.

Start here: Batteries - Service and Recycling - Apple (IN), but Apple probably will refuse to service that battery unless battery service is indicated, and that Mac's battery is functioning normally.