"In some of the Indian vernacular newspapers the message has gone out that the British no longer want Indian students, which is wrong but that's the message that has gone out," said UK business secretary Vince Cable.
"I just want to make absolutely clear, as far as the government is concerned we have no cap on the number of overseas students, we don't propose to introduce one," he assured at the Global Universities Summit in Westminster.
The event in London, organised by the University of Warwick, with representatives from 27 countries, is examining how universities can work with industry to drive economic growth.
University leaders have campaigned for overseas student numbers to be considered separately from the headline figures for net migration into the country, but the government has rejected this argument.
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Prime Minister David Cameron has said he wants to see net migration fall to the "tens of thousands" by 2015. Official figures released last week showed the number of foreign students studying in UK fell to 153,000 last year.
According to the Higher Education Statistics Agency figures released earlier this year, students from India coming to study at UK schools and universities fell by 23.5 per cent last year, including a 28 per cent drop at postgraduate level.
India still remains the second most common country of origin for foreign students in Britain after China.