The Australian state of Victoria is host to 45,000 students from India. On January 2 one of them, Nitin Garg, was stabbed to death in Melbourne, the capital, in the latest and most violent of a series of attacks on Indian students in the city. Victoria’s police say they have no evidence these crimes are racially motivated. But they recorded 1,447 robberies and assaults against Indians in 2007-08, a figure seized upon by the Indian media as proof that their countrymen are being targeted. In response to what the Australian press has dubbed “the curry bashings”, India’s government has issued an advisory urging its nationals to take extra care in Australia’s second-biggest city. The row has become so shrill it threatens to damage Australia’s third-biggest export earner, after coal and iron ore: education, which brings in about A$17 billion (Rs.69,700 crore) a year from foreigners.

Applications for student visas from India have gone into free-fall — down by 46 percent between July and October compared with the same period the previous year. Almost a fifth of Australia’s 630,000 full-time international students hail from India, and the attacks have also received publicity in other big markets such as China. As it was, Australia had been getting a bad press thanks to the collapse of a number of private colleges offering cheap vocational qualifications to foreign students. These had flourished at a time of chronic skills shortages, when hairdressing and catering qualifications opened up a fast track to permanent residence in Australia. But immigration rules have since been tightened.

The global recession and the strength of the Australian dollar have also sapped the country’s appeal to foreign students. In all, applications for student visas have fallen by 23 percent in the past year. Dennis Murray, executive director of the International Education Association of Australia, a trade group, is expecting a quick recovery. He foresees growth of 4 percent a year over the next 20 years. But Australian universities are taking no chances. They are responding to the threat of cheaper foreign competition by forging partnership agreements with Asian counterparts and setting up branches in Asian cities. Two years ago, for example, Melbourne’s Monash University opened a purpose-built campus in Kuala Lumpur.

Having been slow to grasp the full measure of the commercial and diplomatic fallout, the Australian government has gone into overdrive. Senior ministers have descended on Delhi, while Indian journalists have been offered press junkets Down Under. Kevin Rudd, Australia’s prime minister, has even attested to his love of Indian food, a goodwill gesture that went down about as well as a soggy papadom.

(Excerpted and adapted from The Economist)