* State Department: U.S. wants to "move beyond" the dispute
* India formally asks for change in diplomat's U.N. status
* Diplomat accused of visa fraud, under-paying housekeeper
* Protesters ransack Dominos Pizza in India
Indian protesters ransacked a Domino's Pizza outlet in a Mumbai suburb on Friday, demanding a ban on U.S. goods, as officials from the two countries tried to defuse a dispute over the arrest of an Indian diplomat in New York.
The United States said it wanted to "move beyond" the matter and underscored the importance of its ties with India, but a senior Indian official called for an American apology.
Police and the Indian franchise of the U.S. chain said no one was hurt in the attack, which came amid unrelenting rage in India over the arrest and subsequent strip-search of Devyani Khobragade for visa fraud and under-payment of her housekeeper, also an Indian national.
India has demanded that the charges be dropped against the diplomat. Her father threatened to begin a fast if U.S. authorities press ahead with the case. In an unusual move, the United States has flown the family of the housekeeper, Sangeeta Richard, out of India.
Police in Mumbai said they were stepping up patrols of major U.S. outlets including McDonald's after workers of the small Republican Party of India attacked the Domino's store. The group sent pictures to media organisations showing a broken glass door.
"The fact is that (the) American authorities have behaved atrociously with an Indian diplomat. And obviously, America has to make good for its actions," said Manish Tiwari, India's minister for information and broadcasting.
"So therefore, I think it is a legitimate expectation, that if they have erred, and they have erred grievously in this matter, they should come forth and apologise."
Khobragade serves as India's deputy consul general in New York.
NO 'CLEAN SLATE'
In an apparent attempt by India to find a way out of the crisis, the United Nations said it received an official request from New Delhi to accredit Khobragade as a member of that country's permanent U.N. mission in what appeared to be a move to give her a stronger form of diplomatic immunity.
Diplomatic sources said that while such broader immunity could not be applied retroactively to cover the charges she faces by removing the indictment, it could make it harder to follow through on a prosecution against her.
U.S. State Department spokeswoman Jen Psaki said any change in the diplomat's accreditation status would not provide a "clean slate from past charges."
It was not immediately clear if there would be any impact on Khobragade's diplomatic immunity due to the transfer of her accreditation from the Indian consulate in New York, which handles bilateral issues, to the U.N. mission, which oversees India's activities at the world body's headquarters.
Asked whether a change in her diplomatic immunity status could prevent Khobragade from being arrested again or enable her to leave the United States - a possible solution to the matter - Psaki said, "I don't want to speculate on that."
She side-stepped a question as to whether the United States would apologise to India about the issue, but underscored the importance of U.S.-Indian relations.
"We certainly fully agree that it's important to preserve and protect our partnership. It's not just about diplomatic ties," Psaki told reporters, citing more than $90 billion in bilateral trade, close counterterrorism cooperation and engagement on a range of topics including Afghanistan.
"And we want to move beyond this, and I think we all recognise the importance of our long-term relationship," Psaki added.
U.S. Secretary of State John Kerry expressed regret over the case in a phone call to India's national security adviser this week, but U.S. prosecutors have defended the investigation against Khobragade and her treatment. Before this diplomatic blow-up, U.S.-Indian relations were seen as cordial and improving.
Khobragade was arrested last week and released on $250,000 bail after surrendering her passport and pleading not guilty to charges of visa fraud and making false statements about how much she paid her housekeeper. She faces up to 15 years in prison if convicted on both counts.
The U.S. Justice Department confirmed that Khobragade was strip-searched after her arrest. A senior Indian government source has said the interrogation also included a cavity search, although U.S. officials have denied this.
"I want these false and fabricated charges to be dropped," said Uttam Khobragade, the diplomat's father, adding that he would go on a hunger strike if his demands aren't met. "That will be my last option."
Protesters also gathered at the U.S. consulate in Hyderabad for a second day on Friday, shouting slogans, local media said.
In New York, a few dozen protesters including several domestic workers from South and Southeast Asia gathered outside India's consulate, chanting slogans and waving posters demanding that Khobragade's diplomatic immunity be waived.
"Passports revoked, slave wages, restricted communication - this constitutes trafficking workers," said Leah Obias, an organiser with the migrant-workers rights group Damayan. "There are diplomats trafficking workers all over the city and we demand justice."
Manhattan U.S. Attorney Preet Bharara said on Wednesday Richard's family had been brought to the United States after legal efforts had begun in India "to silence her, and attempts were made to compel her to return to India."
Furious that one of its foreign service officers had been handcuffed and treated like "a common criminal", India on Tuesday removed security barriers outside the U.S. embassy in New Delhi and withdrew some privileges from U.S. diplomats.
The reaction in India was even more intense because none of the political parties preparing for next year's general election wanted to be seen as weak against a superpower.
Politicians, including the leaders of the two main parties, refused to meet a delegation of visiting U.S. lawmakers.
"Because of the election, they will try to outdo each other," said Neerja Chowdhury, a political analyst and a former political editor of Indian Express newspaper.
"They don't want to be seen as weak on the issue when the mood in the country is one of huge anger about this."
The party that runs India's most populous state, Uttar Pradesh, urged Khobragade to stand for parliament, highlighting how public outrage has turned the case into a battleground for votes.