The industry chamber said business groups should be entitled to voice their concerns related to a particular policy matter with the government if they feel their interests may be jeopardised.
"Like in the US, we should make lobbying legal with all the rules of transparency in place. In a competitive market, business players with conflicting interests are bound to fight for policy space," Assocham Secretary General D S Rawat said.
"As long as advocacy arguments for or against a premise are being advanced in a fair and transparent manner and no ulterior motives are attached. It is high time, lobbying is not taken as a bad word and professional lobbying firms are allowed," he added.
The government had ordered a probe in December 2012 into lobbying activities undertaken by US-based Walmart to enter the Indian retail market.
However, the government-appointed one-man inquiry panel in its report, which was tabled in the Lok Sabha in February, could not "conclude in the absence of any material evidence available on record up till now, that Walmart indulged in any lobbying/bribery to Indian officials".
Rawat contended that making lobbying and advocacy legal would lead to a clean way of approaching the policymakers and lawmakers if they have any legitimate and genuine interests.
"When the rules of the game are being framed in a particular sector of the economy, those who feel their interests can be in jeopardy should have a right to voice their concern. But it should all be done in an open way and not in a surreptitious manner," he said.