The decline follows a year when attacks on Indian students in Melbourne and Sydney made headlines in India.
They also caused diplomatic relations to sour between Canberra and Delhi.
The Indian government issued a travel advisory to students going to Australia, after the Melbourne murder of graduate student Nitin Garg.
According to a report by Australia's Tourism Forecasting Committee (TFC) in December, more than 70,000 Indians studied in Australia in 2009.
Students from the subcontinent accounted for 19% of total international enrolments.
But the number of Indians applying for student visas to Australia has plummeted by 46% according to the most recent figures from the immigration department.
The drop-off in applicants follows a spate of attacks on Indian students in Melbourne and Sydney in the first half of last year, and a rash of unfavourable headlines about the unscrupulous practices of some colleges and migration agents.
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