Operation India was launched in Milton Keynes, Buckinghamshire, as a joint initiative between council taxi licensing officers and police to carry out checks on taxi drivers.
But both councillors and the taxi community have described the name of the scheme as racially insensitive.
"This name must be reconsidered, people will be outraged and it does not send a good message about ethnic minorities," Councillor Mohammed Khan was quoted as saying by Milton Keynes Citizen.
"Its essentially blaming all Indian taxi drivers, these are good hard working people who work unsocial hours to make sure people get home safely," he said.
A taxi boss, who has worked in Milton Keynes for 12 years, said, "I dont have a problem with the police and council coming to check that our taxis are legal and safe."
"However to use India as the name of the operation is racially insensitive and it should be retracted. Just to use the word…its like theyre implying criminal drivers are Indian," the taxi boss said.
"I think it will cause outrage across the taxi driving community, why did they have to use a country or race?" the taxi boss added.
However, the council has defended the name Operation India.
A spokesperson was quoted as saying, "These joint operations are identified using the internationally recognised phonetic alphabet — for example the previous three operations were called Operation Foxtrot, Golf, Hotel."
"It is very common practice and the next operation will be called Operation Juliet," the spokesperson said.
"These operations are important in helping to ensure that the public can be guaranteed a safe journey in a roadworthy vehicle and we will continue to carry them out," the spokesperson added.
The scheme which targets Hackey Carriage and Private Hire vehicles with suspected defects or breaches saw 12 licensed vehicles stopped.
Chief executive of the Milton Keynes Equality Council, Navrita Atwal said, "The name Operation India could be perceived as misleading."
"Anything giving pre-conceived messages where communities are being policed should be avoided. We would always encourage using names for project that build and create good community relations," she said.
"We are living in sensitive times and should exercise double caution as to not cause offence or mistrust as community relations take a long time to build," she added.