"The government does not support commercial surrogacy," it said in an affidavit to the Supreme Court, which is hearing a petition regarding the industry.
Wombs for rent: Commercial surrogacy big business in India
"No foreigners can avail surrogacy services in India," it said, adding that surrogacy would be available "only for Indian couples".
Thousands of infertile couples, many from overseas, hire the wombs of local women to carry their embryos through to birth.
But debate has been growing over whether the unregulated business exploits poor women, prompting a petition to the top court for action.
The court earlier this month ordered the government to spell out measures for regulating the industry after expressing concern, while hearing the petition which seeks a halt to the importation of human embryos for commercial purposes.
India, with cheap technology, skilled doctors and a steady supply of local surrogates, is one of relatively few countries where women can be paid to carry another's child through to birth.
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The process usually involves in-vitro fertilisation and embryo transfer, leading to a rise in fertility centres offering such services.
The government, in its affidavit presented to the court in Delhi by Solicitor General Ranjit Kumar, said it would "require some time to bring the law in place".
"The government will prohibit and penalise commercial surrogacy services," it said.
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