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Police stressed there was no evidence of a racial motive after four men poured an unidentified fluid on the 29-year-old man and set it alight in a Melbourne suburb, leaving him with 15 per cent burns.
It follows last weekend's stabbing murder of an Indian man in the city which prompted a New Delhi newspaper to print a cartoon likening Australian police to the Ku Klux Klan.
In the latest incident, the victim was parking his car in a side street after dinner with friends when he was attacked in the early hours of Saturday. His condition was described as stable.
"I believe there's no reason at this stage to consider this in any way racially-motivated," detective sergeant Neil Smyth told reporters.
"The circumstances of parking a car randomly on a side street and just some people approaching him are a bit strange and it's highly unlikely, therefore, to be a targeted attack on any individual."
Police have only a vague description of the attackers "which is really just unspecific, just four males", Smyth said. "It is an unusual event," he added.
Deputy Prime Minister Julia Gillard said the government "condemns all acts of violence in the strongest possible way".
"This matter remains under investigation by the Victorian police," she said in a statement.
The incident follows the January 2 murder of Nitin Garg, which brought sharp condemnation from India's government and allegations of Australian racism in Indian media.
The Mail Today defended its cartoon, which showed an Australian police officer in a Ku Klux Klan hood, insisting the Melbourne force was a "racist organisation".
"We perceive the Melbourne police to be a racist organisation simply because it seems it is not acting fast enough, or seriously enough, on the attacks on Indian students," editor Bharat Bhushan said in an emailed statement.
The incidents follow a series of attacks on Indian nationals and students in Australia which sparked street protests and a diplomatic row in the middle of last year.
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