Paypal is not an accepted payment method at eBay India. I have contacted customer support and received this reply.
You can't be able to offer paypal as a payment option for your listings even though your item is listed internationally from eBay India.
Similarly, you can't be able to pay your seller's fees through paypal from eBay India. If you want to pay your eBay seller's fees by paypal, you should have an account at either eBay USA, UK, Australia or at any one of the european eBay sites.