There have been large rallies against the attacks in Australian cities
The number of Indian students studying in Australia is projected to fall by about 20% in 2010.
Australia's Tourism Forecasting Committee (TFC) has said the students are choosing to stay away due to a series of attacks in mid-2009.
Australian police blamed the attacks on opportunistic criminals, but some Indian students see them as racist.
The drop in the number of Indian students is expected to cost Australia almost $70m (£44m).
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 4,000 fewer Indian arrivals next year, a drop of 21% despite a predicted growth in international tourism numbers of 4.3% in 2010.
TFC chairman Bernard Salt said this was the first assessment of the impact of negative publicity over alleged racial violence and exploitation of Indian students this year.
"This is a segment that has grown strongly throughout this decade, but the downturn is expected in response to concerns that the Indian community have had about safety," said Mr Salt.
The predicted slump was not as bad as some had expected immediately after the street protests in June against the 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 state radio.
Australia's higher education industry has grown in value to $15.4bn a year and students from the subcontinent account for 19% of total international enrolments.
An interim report on Australia's international education sector released this month found its global reputation and brand had been damaged by violent attacks and migration scams, "particularly in India".
Prime Minister Kevin Rudd visited India this year, together with his education and foreign ministers, to deliver assurances that Indian students were safe.
The attacks earlier this year on Indian students attracted prominent media coverage in India.
An Indian minister cancelled a planned trip to Australia and one of the country's leading film stars, Amitabh Bachchan, turned down an honorary degree from Queensland University of Technology, saying he could not accept it under the circumstances.