Australian instititions have witnessed a 30% drop in enrolment by Indian students while total admissions by overseas students decreased by 2.5% during February this year as compared to the same period last year.
According to latest figures, released by Australian Education International, enrolments by Indian students across all sectors dropped 30.3% during February this year but China recorded an increase of over 8%.
Total enrolments from India stood at 45,904 this February against 65,960 last year's.
India is the second biggest market for international education, with a 12.3% share, behind China on 30.5% of overall education sector Down Under.
The sharp fall has been noticed as compared to the average February growth rates for enrolments since 2002 of 10% per year, hitting the Australia's billion dollar international education industry.
The biggest drop was witnessed in vocational courses - cooking and hairdressing - with a 21.5% fall.
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The sector raised concern over the rising Australian dollar which would further slump the market.
The rising dollar combined with high costs of living in capital cities would make it more difficult to persuade potential students to choose Australia, Simon Marginson of Centre for Study of Higher Education at Melbourne University was qouted as saying by 'The Age'.
"Because of the cost of living and housing you would find there would be places in Australia that are more expensive than the US," he said.
The change in visa rules by Federal government last year is a bigger problem than the rising dollar, Marginson said, but that the two combined would cause a lot of potential students to look elsewhere.
China, one of Australia's largest source markets for international students, would look to places such as the US and Canada if problems surrounding visa processing were not fixed, he said.
"The US has a prestige advantage and if the cost trend is working against us and the US retains its prestige advantage, then that makes things difficult for us."
Universities Australia chief Glenn Withers expects the slump to continue through 2011 and into the future.
He said the problem had been caused by visa changes, the rising dollar, aggressive competition in the international student market and image problems including the recent attacks on international students.