Gyan Correa's National award-winning film was chosen over the widely-tipped The Lunchbox, as well as commercial hits Bhaag Milkha Bhaag and English Vinglish.
Ashanti Omkar, Indian cinema expert for Cineworld cinemas, told Digital Spy: "Twitter has been going abuzz with the news of India's rather surprising Oscar choice of The Good Road by Gyan Correa.
"The London Indian Film Festival gave this road movie an international premiere, to successful screenings around the city. The Lunchbox starring Irrfan Khan, was highly tipped for this honour and has sold out it's forthcoming London Film Festival screenings and garnered rave reviews."
This entry has befuddled the likes of director Anurag Kashyap, who has been ranting on social media in a candid manner, as has co-producer Karan Johar.
The 'Best Foreign Film' category entrant is a lost-and-found story of three groups of people travelling on a highway in modern-day Gujarat.
Originally released in July this year, the project was made with the assistance of the National Film Development Corporation of India (NFDC).
Recent Indian entries in the category for 'Best Foreign Film' include Rang De Basanti, Eklavya: The Royal Guard, Taare Zameen Par and Barfi!.
The Good Road had its international debut at the London Indian Film Festival.
The 2014 Academy Awards will be held on March 2, 2014 at the Dolby Theatre in Hollywood, CA.