"India can't be treated like a banana republic," he told reporters after coming out of the parliament.
"Calling the incident unfortunate is putting it mildly. We want an unconditional apology," he said.
Kamal Nath said "more steps need to be taken to awaken the US (because) it's (now) a changed world".
Union Home Minister Sushilkumar Shinde said India unhappy with the way the US treated its diplomat.
On Tuesday morning, Congress vice president Rahul Gandhi and Bharatiya Janata Party's prime ministerial candidate Narendra Modi refused to meet a four-member US Congressional delegation. Shinde also did not meet the delgates.
On Monday, National Security Advisor Shivshankar Menon and Lok Sabha Speaker Meira Kumar had refused to meet the delegation.
Menon called the US act "barbaric" and said US has insulted an entire nation.
Khobragade, India's deputy consul general in New York, was charged last week with visa fraud and making false statements for seeking residence and employing her Indian housemaid.
The 39-year-old diplomat was strip-searched, confined in a cell with drug addicts and also subjected to DNA swabbing, sources confirmed to IANS.
External Affairs Minister Salman Khurshid said that India has "communicated strongly our discontent."
"We take this very seriously," he added.
His junior minister Preneet Kaur said the treatment meted out to the Indian diplomat is "unfortunate" and "we will do everything on at a diplomatic level."
India on Tuesday took a slew of steps to pare down the privileges of American diplomats here in a retaliatory measure.
--IANS (Posted on 17-12-2013)