Warren Gatland says the "Gypsy boy" comment aimed at Samson Lee by Joe Marler was "banter" and insists Wales have no issue with the England prop.
Marler apologised to Lee, who is from a Traveller background, at half-time during England's Six Nations win.
Traveller campaigner Shay Clipson said Marler should be banned.
"It's not just in sport, I think it's in every aspect of life where people get so PC and just make massive issues about things," said coach Gatland.
"It was just one of those things, a little bit of banter. We've accepted that and we've accepted his apology. Just move on.
"Fifteen or 20 years ago, those things were sorted out with fists and stuff."
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The comment by Marler, 25, is under investigation by Six Nations officials.
Clipson, the founder of the National Alliance of Gypsy, Traveller and Roma Women, told BBC Radio 5 live that the Harlequins prop "cannot make mistakes like that and expect to just say sorry and walk away".
She added that the public had to imagine what the reaction would have been had a black or Asian player been subject to that sort of derogatory remark.
Marler has been cited for a separate incident of foul play involving another Wales prop, Rob Evans.
A previous Welsh Rugby Union statement said: "We're disappointed by the comment made and pleased Joe Marler apologised."
On Monday, assistant coach Rob Howley commented: "As players and coaches, there's banter in the game, but I think there's no place for that."
Marler's comment was heard by television viewers after being picked up on referee Craig Joubert's microphone.
"In modern sport, players have got to be aware that there are microphones everywhere and you have to act accordingly," said Gatland.