The number of Indian students studying in Australia is projected to fall by about 20% in 2010.
The Tourism Forecasting Committee said the students are choosing to stay away due to a series of attacks in mid-2009.
Australian police blamed the attacks on criminals, but some Indian students see them as racist.
The BBC reports the drop in the number of Indian students is expected to cost Australia almost $US70 million.
More than 70,000 Indians studied in Australia in 2009. Australia's higher education industry is its third biggest export earner after coal and iron ore.
The TFC said that judging from visa applications there would be 4000 fewer Indian arrivals next year - a drop of 21% despite a predicted growth in international tourism numbers of 4.3% in 2010.
However, the predicted slump was not as bad as some had expected after the street protests in June against violence in Sydney and Melbourne.
"We were predicting a drop of about 50%," Gautam Gupta, president of the Federation of Indian Students of Australia told ABC radio.
The BBC reports Australia's higher education industry has grown in value to $US15.4 billion per year. Students from the subcontinent account for 19% of total international enrolments.