Manji Yamada was born last month after eggs from an Indian donor were fertilised using the Japanese man's sperm and implanted in the womb of the surrogate Indian mother.
Her biological father split from his wife after the fertilisation process, and his former spouse no longer wants the baby.
In the absence of a surrogacy law in India, the child -- who is an Indian citizen -- will have to be adopted by her Japanese father Ikufumi Yamada, 45.
But Indian law does not allow the adoption of a girl by a single father, lawyers and doctors said.
"There is a legal complication as the father is alone and Indian adoption law says a single male can't adopt a girl," Sanjay Arya, the doctor who is looking after the baby, told AFP by phone from western Jaipur city.
Manji cannot leave the country without a passport and is being looked after in Jaipur by her paternal grandmother and an Indian friend of the father.
"Yamada went to the local passport office. He was told to go to the Japanese Embassy, which asked him to get a document from an Indian court to get custody of the child," Arya said.
"He felt like a football."
The baby's father and grandmother were present at the hospital for her birth. Yamada has since returned to work in Japan, and is expected to come back to India after some headway has been made.
"I spoke to him today. He can't plan anything till the baby's passport is made," said Ikufumi's friend, Kamal Vijayvargiya, who consulted legal experts.
Arya, the doctor, said lawyers would file a court petition on Thursday seeking adoption by the father and temporary custody of the child by the grandmother till then.
"The surrogacy doesn't matter. He is, after all, the biological father," the doctor said.
Manji was born on July 25 in western Gujarat state. The child's father, identified by the Indian media as a Tokyo surgeon, moved her to Jaipur city in Rajasthan state after serial bomb attacks in Gujarat in which some 50 people died.
"The baby is alright, but the grandmother is very tense," and wants to take the infant back to Japan as soon as possible, Arya said.
The baby's fate made front-page news in Indian dailies.
"Conceived in Japan, stuck in Jaipur" read the headline of the largest-selling English daily, The Times of India, saying the baby could become the country's "first surrogate orphan" if the problems were not resolved.
"With India emerging as a destination for surrogate pregnancies, a law (to regulate surrogacy) will have to be brought into effect," leading lawyer Indira Jaising told the Indian Express newspaper.
Critics call the practice "wombs for rent," but surrogacy has emerged as a booming business in India.
Gujarat's Anand town -- where the baby was born -- has emerged as India's surrogacy centre after the high-profile case of a woman who gave birth to her own grandchildren on behalf of her British-based daughter in 2004.
Surrogate mothers in Anand charge about 100,000 rupees (2,500 dollars) for a pregnancy and have been approached by a number of overseas Indian and foreign couples who can have a surrogate baby at a fraction of the cost in Western countries.
Surrogate mothers are often poor women who opt to carry a stranger's baby to help pay education and housing costs for their own families.
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