The South African has refrained from commenting since being dumped just weeks before the Ashes campaign against England, but in an interview with Sydney's The Daily Telegraph he detailed a fractured relationship with his vice-captain.
"My relationships were outstanding, except with Watson. He was one of the guys I lost," Arthur said.
"India was where it started going wrong, when we suspended those players.
"If I sit back and think, 'would I have done it again?', well, I probably would. Because I believed so much in what we were trying to do."
They were axed with Watson controversially sent home.
"I met with all our staff before I did it and our staff were adamant that was the right way to go," said Arthur.
"I ended up making those decisions and then ended up bearing the brunt of them."
Arthur ultimately paid the price for a poor Champions Trophy campaign in England after India and a lack of discipline in the team, which came to a head when David Warner punched England's Joe Root in a Birmingham bar in June.
Arthur sued Cricket Australia for his job back or up to Aus$4 million (US$3.7 million) in compensation, saying there was a deliberate campaign against him. But he settled after "significantly reducing" his claim.
Arthur said he was annoyed because "I put my head on the line with a lot of big decisions and a lot of the people who were very keen for us to make those decisions then backtracked".
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