Khurshid said on the sidelines of a FICCI event here that India and the US were in talks to resolve the standoff and the two sides would not want their ties to be hurt.
He said the ongoing "conversation" between India and the US to resolve the row over the treatment meted out to India's deputy consul general in New York, Devyani Khobragade, should be allowed to reach its "logical conclusion".
"Let the conversation go to its logical conclusion. My conversation (with the US) is not complete," he said to questions on what India and the US were doing to resolve the stand-off, especially after the US said it would not dilute its legal stand on Khobragade, charged with visa fraud and underpaying her maid.
He said India and the US have close ties that have been built over many years and both sides would not want the partnership to be spoilt over "one incident".
Earlier, during a talk on "Image India" at FICCI, he said India does expect its strategic partner - the US - to be understanding about its need to be allowed to live with dignity and the two sides need to sit down and talk to resolve the row.
He said the Indian legal system may be slow but India's Supreme Court has said people should not be handcuffed because it lowers their dignity.
"But the American Supreme Court has not said it. I have been law minister and have never heard expressions like cavity searches," said the minister to loud applause from the audience.
India has taken a tough stand on the incident, including paring down of special privileges meant for US diplomats. Ministers and top officials have also declined to meet a visiting US Congressional delegation.
India has termed the strip and cavity search of Khobragade barbaric and despicable and demanded an apology and unconditional withdrawal of the case against the envoy.
The opposition Bharatiya Janata Party Saturday withdrew its invite to the US consul general in Mumbai to attend a rally by the party's prime ministerial candidate Narendra Modi there Sunday.
The US has made no move to drop the charges against Khobragade or offer an apology but responded with a softened tone to India's reconciliatory stress on preserving their "valuable" ties.
President Barack Obama left for Hawaii for his annual holiday without referencing the spat with India at his hour-long year-end press conference, an indication perhaps that the issue was not on his table and was not deemed serious enough to merit a comment from the White House.
Both countries engaged in diplomatic conversations at various levels to find a solution to the standoff sparked by the arrest of Khobragade, State Department spokesperson Jen Psaki told reporters Friday when asked if an apology was forthcoming.
She pointed to the comments of Khurshid, "where he talked about the importance of US-India relations, talked about how valuable they are".
Psaki said the US fully agrees that it was important to preserve and protect the bilateral partnership.
"It's not just about diplomatic ties. So we will continue these discussions through diplomatic channels, through private conversations," she said.
On the issue of dropping the charges of visa fraud against Khobragade, Psaki stood firm.
"This is now a legal case, and of course the State Department doesn't have jurisdiction over that. We have been clear about our position of certainly standing with our judicial colleagues," she said.
On the issue of diplomatic immunity for Khobragade in her new job at India's Permanent Mission at the UN in New York, she said: "When immunity is conferred, it does not retroactively take effect at a previous point in time, but relates solely to the diplomat's current status."
India's Commerce and Industry Minister Anand Sharma Saturday said commercial ties between India and the US will not be impacted by the arrest of Khobragade and the "relationship will go stronger".
--IANS (Posted on 21-12-2013)