Bulldozers have removed security barriers outside the US embassy in Delhi as a diplomatic row prompted by the arrest of an Indian diplomat on visa fraud charges in New York intensified.

Devyani Khobragade, India's deputy consul general in New York, was charged last week with making false statements on an application for her housekeeper to live and work in the United States.

India's national security adviser on Tuesday called the treatment of Khobragade "despicable and barbaric" and the country's foreign secretary summoned the US ambassador. Politicians – including Rahul Gandhi, the scion of the Nehru-Gandhi dynasty and vice chairman of the ruling Congress party, and Narendra Modi, the prime ministerial candidate of the Hindu nationalist opposition BJP – refused to meet a visiting US congressional delegation.

The removal of the barriers was one of a slew of retaliatory actions taken by the Indian government as outrage at the arrest grew, including the withdrawal of import clearances and special airport passes. The incident has become a major story in India, dominating TV bulletins.

The arrest of Khobragade touches on a range of sensitivities in India. Special official privileges – such as the right to use a red beacon light on an official car are minutely graded and valued in India. Unofficial privileges of the wealthy and powerful – such as the ability to "settle" police inquiries without publicity – are equally well-entrenched.

Much of the criticism in India of the arrest has focused on how Khobragade was treated as a "common criminal". According to Indian officials, Khobragade was arrested and handcuffed as she dropped off her daughter at school, then strip-searched and kept in a cell with drug addicts before posting $250,000 (£153,000) bail.

India is also acutely sensitive to its international image and status. Far less serious incidents have provoked major clashes in the past. Standard security checks in the US frequently make front-page news in India when they involve visiting dignitaries, who are ushered through airports as VIPs in their own country.

Prosecutors in New York say Khobragade, 39, claimed she would pay her Indian maid $4,500 a month when applying for a visa at the US embassy in Delhi to bring her to New York but actually paid her a third of the US minimum wage of about $10 an hour. She has pleaded not guilty to the charge, which could lead to a 10-year prison sentence, and plans to challenge the arrest on grounds of diplomatic immunity, her lawyer said last week.

In Washington, the US state department has said that standard procedures were followed during Khobragade's arrest. Officials argue that her immunity from prosecution extends only to actions directly connected to her position.

Khobragade's father, Uttam Khobragade, told the TimesNow TV news channel that his daughter's treatment was "absolutely obnoxious".

"As a father I feel hurt, our entire family is traumatised," he said.

In India most middle class families will employ at least one full-time domestic servant, possibly two and sometimes three or four. Wealthy households sometimes employ dozens, including drivers, cleaners, cooks, nannies and gardeners. Supporters argue that the custom provides a degree of welfare and social mobility for often illiterate workers from rural areas which otherwise would not exist. Critics say it reinforces a rigid hierarchy and is exploitative.

Public transport appears to be a particular point of tension for Indian dignitaries in the US. Mani Shankar Aiyar, a veteran of the Congress party, wrote that "Democracy in America apparently means the right of the lower orders to be rude to their social superiors" after a trip to the US last year.

In 2010 there was uproar after India's UN envoy, Hardeep Puri, was reportedly asked to remove his turban at a US airport and detained in a holding room when he was refused. A hands-on search of India's US ambassador Meera Shankar at an airport in Mississippi that year also prompted claims that India had been "insulted".

In 2009 Continental Airlines apologised to former Indian president APJ Abdul Kalam for searching him in Delhi before he boarded a flight to the US, and in 2005 India's former speaker of parliament Somnath Chatterjee refused to attend an international meeting in Australia without a guarantee that he would not have to pass through security.

Chatterjee said even the possibility of a security screening was "an affront to India".