"Ambassadors have a right to meet anyone. We are an open democracy. We have no issues," Sharma told reporters on the sidelines of an event.
In a lighter vein, the minister said he hoped the development would also help the Gujarat Chief Minister secure a visa to visit the US "one day".
"What difference does it (the proposed meeting between Modi and the US Ambassador) make? I hope one day he gets the visa to travel (to the US)," he said.
The US had cancelled Modi's visa in 2005 under its domestic law over "serious violations of religious freedom" and had been maintaining a stiff stance vis a vis the BJP leader since.
Powell's request for a meeting with Modi is being widely seen as an apparent softening of the US stand. Ambassador Powell is likely to meet Modi in Gujarat capital Gandhinagar on Thursday, marking an end to the boycott of the the BJP leader in the aftermath of post-Godhra communal riots in 2002.
Powell is likely to discuss with BJP's prime ministerial nominee issues related to the Lok Sabha elections and his vision for the country.