Nehwal fought hard and won the first game 23-21, despite Busanan messing up on her serves. The unforced errors on her serve continued but Busanan rallied well to take the second game 21-14.
As Saina began to tire in the third game, yet she battled on but eventually lost 14-21.
In the previous round, Saina got a comfortable 21-15, 21-15 win over Kisona Selvaduray of Malaysia.
Just before the start of the match, Kidambi Srikanth on Thursday took to social media to announce that he is pulling out due to a calf muscle strain.
Earlier on the day, Satwiksairaj Rankireddy and Chirag Shetty lost 19-21, 17-21 to Mohammad Ahsan and Hendra Setiawan in just 34 minutes to crash out of the men's doubles event in the ongoing Thailand Open.
Satwiksairaj will be back in action tough with Ashwini Ponnappa as they face take on Chang Tak Ching and NG Wing Yung of Hong Kong in the mixed doubles.
On Wednesday, Parupalli Kashyap exited the tournament after he retired in the third game of his first-round clash against Canada's Jason Anthony Ho-Shue owing to a calf injury.
MR Arjun and Dhruv Kapila had also narrowly lost their men's doubles opening round contest 21-13, 8-21, 22-24 to Malaysian pair Ong Yew Sin and Teo Ee.
On the first day of the tournament, on Tuesday, PV Sindhu suffered a shock defeat on her return to international badminton, losing in three games to Denmark''s Mia Blichfeldt in the opening round. Sindhu, seeded sixth, returned to action with a 21-16 24-26 13-21 defeat to world no 18 Blichfeldt in a 74-minute battle.
In men's singles, world No. 13 B Sai Praneeth too suffered a straight game loss to Thailand''s Kantaphon Wangcharoen on his return to competition. Praneeth went down 16-21 10-21 to the world No. 15 Wangcharoen for only his second loss to the Thailand player.
The Indian mixed doubles pair of Satwik and Ashwini claimed a 21-11, 27-29, 21-16 win over the Indonesian pair of Hafiz Faizal and Gloria Widjaja. The women's doubles pair of Ashwini and N Sikki Reddy lost 16-21 7-21 to fourth-seeded Korean pair of Kim So Yeong and Kong Hee Yong.