After serious diplomatic clashes with Pakistan and Afghanistan in the past several weeks (over drone strikes and a security agreement respectively) it looks like Washington is going to make it a full house in South Asia, with a serious escalation of tensions with India.

Last week the US arrested India’s deputy consul general in New York, Devyani Khobragade, on charges of visa fraud and filing a false contract about her Indian housekeeper’s salary. Indian papers reported that she had been handcuffed in public, put through strip and cavity searches and detained alongside drug addicts.

Delhi has reacted with outrage – perhaps sharpened, somewhat, by political competition ahead of next year’s general elections. The National Security Advisor, Shivshankar Menon, called US behaviour 'despicable' and 'barbaric'. The government quickly announced a series of retaliatory measures. These included the withdrawal of airport passes for US diplomats and ID cards from consular staff, a demand for information about the visas of teachers in US schools and the activities of embassy spouses, a ban on all import clearances for the US Embassy (including alcohol – it could be a dry Christmas) and, most seriously, the removal of the embassy’s security barriers.

Opposition BJP prime ministerial candidate Narendra Modi, vice chairman of the ruling Congress Party Rahul Gandhi, and the home minister all refused to meet with a visiting delegation of the US Congress. This is not being taken lying down.

Remarkably, Indian officials and politicians have even suggested that India might use its ban on gay sex, re-imposed by the Supreme Court only a week ago, to target the partners of homosexual diplomats: 'put them behind bars and do what you like with them', is how Yashwant Sinha, a leader of the BJP, put it. The Hindu quoted a senior Indian diplomat as warning, darkly, 'we...know who all have brought in their gay partners'.

It is exceptionally unlikely that anything will come of these threats, but for serving officials to even raise the possibility is a measure of how rapidly this dispute has escalated.

Others have been outright hysterical, with former ambassador MK Bhadrakumar suggesting that it’s all part of a US intelligence effort against India. One Indian journalist even attacked the Indian-born US attorney who ordered the arrest of Khobragade, suggesting that he 'wants to prove that he is more American than the original Americans by taking on Indians'.

Former Indian ambassador TP Sreenivisan has written a measured account from India’s point of view, acknowledging that there was a 'technical irregularity' over Indian compliance with local labour laws (systematic underpayment of domestic staff) but one that had long been tacitly agreed between Washington and Delhi.

US officials have insisted, however, that diplomatic immunity would only apply 'with respect to acts performed in the exercise of Consular functions'. Indeed, the US State Department’s own guide for law enforcement makes it clear that 'There is a common misunderstanding that consular personnel have diplomatic status and are entitled to diplomatic immunity', whereas in fact 'their personal inviolability is quite limited'.

That said, the US has difficult questions to answer over why it claimed diplomatic immunity two years ago when CIA contractor Raymond David was arrested in Lahore for killing two Pakistanis, despite Davis’ ambiguous diplomatic status in the embassy there. And why did the US feel the need to handcuff Khobragade in public, when it could surely have done so more discreetly?

India also needs to be careful. A timeline of events by Rediff suggests that this issue stretches back to March, with the Indian government bullying the housekeeper in question, revoking her passport, and detaining her family in India. She herself has been charged with 'extortion, cheating and conspiracy', and would be arrested if she returns to India.

It is difficult to see how Indian diplomats’ domestic arrangements can any longer remain the subject of a tacit understanding; the US press will almost certainly take a keener interest in the situation.

With respect to Indian retaliation, withdrawing security barriers from the embassy is a dangerous step that increases the risk of security breaches. If an incident were to occur, Delhi would be severely embarrassed. The government also risks being forced into tougher measures by the media and opposition parties, against its better judgment.

India has always reacted particularly sharply to indignities involving its politicians and diplomats, and it is easy to see this episode getting more poisonous if it drags on for much longer. It seems likely that the US will express contrition for the precise manner of the arrest, and that Khobragade will eventually be spirited out of the country to continue her diplomatic career elsewhere. But a lot more wrangling might come first.