"The UK's market of students from India has fallen sharply in recent years, while remaining stable for those students from China the number of students from India fell from a peak of 24,000 in 2010-11 to fewer than 10,000 in 2016-17," the report notes, which it says reflects a fall by 11 percentage points since 2010.
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"This is probably connected to the ending of some sponsor licences and the change in the post-study work offer. There has also been adverse coverage of the UK as a place to study in the Indian press," it adds.
It recommended an overall easier transition from student to work visas for talented applicants, including extending the limited post-study leave period from the current three to six months for Masters students. But it dismissed the need for an exclusive post-study visa route, seen as central to attracting students from countries like India.
University chiefs have been campaigning for a dedicated post-study visa route, most recently with representative body Universities UK proposing a new 'Global Graduate Talent Visa' to allow qualified international students to work in a skilled job in the UK for a period of two years after graduation.
Prof Janet Beer, President of Universities UK, said the organisation, which represents the country's 136 leading universities, was "disappointed" with the report's main recommendations.
"The ability to work in a skilled job for a limited period after graduation is, for many prospective international students, an important part of the overall package when deciding where to study improved post-study visa would put us on a par with what is offered by countries such as the US, Canada and Australia," she said, warning that growth in student numbers will only be possible if the UK adopts a more encouraging immigration system.
In another controversial move, the MAC report also concluded there was no case for international students to be removed from the government's annual migration targets.
Also Read | Outrage as UK excludes Indian students from new relaxed visa rules
"If there is a problem with students in the target, it is with the target itself rather than the inclusion of students in the target," said MAC Chairman Professor Alan Manning in his Foreword to the report.
Campaigners warn that while the UK continues to count international students as long-term migrants in its net migration target, there is continued pressure to reduce their numbers and adds to the perception that overseas students are not really welcome in the UK.
"The good thing it (MAC) does do is to explicitly call out that the government's net migration target is a political target, and therefore a problem in itself. But it shoots itself in the foot by then recommending that students stay within this target," said Sanam Arora, Chair of the National Indian Students and Alumni Union (NISAU) UK, which has been campaigning for a friendlier visa regime for Indian students.
"The post-study work visa is the key thing required so what is the point of issuing recommendations and reaffirming findings we all already know if you're not going to do anything about it," she questioned.
A British Chambers of Commerce spokesperson added, "Business communities around the UK will be bitterly disappointed not to see support for the removal of overseas students from the immigration statistics".
The MAC report recognises that there will be cross-sector disappointment by its recommendation on post-study work visas, but says that demand for UK education should not be based on work rights.
Its recommendations will now be taken into account by the UK government in any future changes to the immigration policy.