India Wednesday said it wants "unconditional release" of its diplomat in New York, Devyani Khobragade, and withdrawal of all charges against her. The US stuck to its guns, saying it acted "appropriately".
The US has also demanded restoration of security for its missions in India.
A day after India pared down some of the privileges extended to US diplomats in what it described as a "reciprocal measure", it is learnt that the arrest and humiliating body search that Khobragade, India's deputy consul general in New York, was subjected to was perhaps the first time such behaviour was reported with a diplomat.
The demand for unconditional release and taking back all charges came even as Khobragade was shifted to India's permanent mission in New York, where she will enjoy full diplomatic immunity, something her consular status did not provide.
Khobragade has been charged with visa fraud and under-paying the domestic help she took along with her from India.
India also denied that its move to remove barricades around the US embassy in New Delhi would, in any way, impact the security of the mission, saying there was adequate security in place, including a police picket and patrolling.
The police barricades on Nyaya Marg in New Delhi's diplomatic enclave had come up following the 9/11 attacks in the US.
On Tuesday, the police barricades were removed while the police picket remained.
The move was in "reciprocity" to US authorities in Washington depriving the Indian embassy of its diplomatic parking lot a year ago.
The Indian embassy in Washington had made numerous requests to get the parking lot restored but to no avail.
India is known to be very angry that the US authorities failed to observe diplomatic protocol by failing to even inform the head of India's New York mission about orders given for the arrest of Khobragade last week.
She was "picked off the street", handcuffed in public and put through body search and kept with common criminals.
US officials Tuesday spoke of a "broad and deep friendship" and an "important relationship" with India, but expressed no regret let alone the "unconditional apology" demanded by India.
US State Department spokesperson Marie Harf said "an isolated episode" should not "impact the bilateral relationship".
Minister of State for Human Resources Shashi Tharoor, addressing a press conference at the Indian Women Press Corps, said the treatment meted out to Khobragade was "an outrageous violation and not something we expect from a friendly nation... It is not a friendly act. But the fundamental relations between us is not under question."