India's foreign minister demanded Thursday that the United States drop a case against an Indian diplomat who was arrested and strip-searched after being arrested in New York City for alleged visa fraud.

The case has sparked a diplomatic furor between the United States and India, which is incensed over what its officials describe as degrading treatment of Devyani Khobragade, India's deputy consul general in New York.

Khobragade was arrested last week and charged with paying her Indian housekeeper far less than she had claimed on a visa application.

Indian officials said Khobragade had earlier accused the housekeeper of blackmailing her last summer over the salary amount.

External Affairs Minister Salman Khurshid told reporters on Thursday that Khobragade should never have been arrested, and that the housekeeper should have been arrested instead.

Khurshid told reporters that the housekeeper had offered Khobragade a "settlement," demanding that the diplomat arrange for a new passport, a work visa and a large sum of money for the maid, in exchange for which she would not report the diplomat.

Khurshid said he would speak to U.S. Secretary of State John Kerry later Thursday.

"This is an extremely distressing and hurtful incident that needs to be addressed," he said.

The case has sparked outrage across India, where the idea of an educated, middle-class woman facing a strip-search is almost unimaginable, except in the most brutal crimes.

In an unusual step, the U.S. attorney in Manhattan publicly defended Khobragade's treatment, and questioned why there was more outrage for Khobragade than for the housekeeper.

Khobragade's case has chilled U.S.-Indian relations, and India has revoked privileges for U.S. diplomats in protest. Kerry earlier called a top Indian official to express his regret over what happened.