India started day five on 98-2 but despite losing Ajinkya Rahane in the second over, they batted out the day to finish on 334 for five — helped by Paine’s three dropped catches behind the stumps.
“We were pretty confident, no doubt, with our attack,” Paine said.
“I thought we’d certainly created enough chances to win the game, and we did, so it’s a tough one to swallow, particularly given my situation.”
“I thought our bowlers were superb all day, Nathan (Lyon) tried everything, the quicks were awesome,” he added.
“Just didn’t hold our catches, myself in particular. You’ve got to cop the blame for that, wear it and move on to Brisbane.”
The result means the series remains 1-1 heading into the final Test at Brisbane later this week, a ground where Australia have a formidable record.
Paine said his team had yet to play to its full potential after winning in Adelaide by eight wickets before India clinched victory in Melbourne by the same margin.
“We didn’t play our best in Adelaide or Melbourne to be fair, I thought in this Test match we showed glimpses of our best,” he said.
“We are certainly back closer to where we want to be as a batting group… I think there were some positive signs, and our bowlers tried their hearts out and created plenty of chances.
“So I thought today was a wholehearted effort from the boys and things just didn’t quite go our way.”
But there were encouraging signs for Australia with Steve Smith back to form with scores of 131 and 81, debutant Will Pucovski’s 62 and a sparkling 84 from fellow rookie Cameron Green.
“Will started his first Test well with a half-century, we saw real glimpses of how good he can be,” said Paine.
“Cameron has been showing it all series and I thought yesterday afternoon he was absolutely sensational to put us in a position to get a long way ahead in the game and set up that declaration.”