A House of Lords committee on Friday accused the David Cameron government of creating an unwelcoming atmosphere for international students from countries like India.
The Lords Science and Technology Committee found a 10% drop in the number of foreign students coming in to study crucial science, technology, engineering and mathematics (STEM) courses in a report released in London.
"We have seen quite significant growth in China and Hong Kong in particular, while in India and Pakistan in particular we have seen some reductions. Those reductions have been throughout STEM and non-STEM," the report said in its country-wise analysis.
It added: "The number of students from India increased rapidly from 2003/04, reaching a peak of nearly 12,000 in 2008/09. In the last two years, there has been a dramatic fall in the number of Indian students coming to study in the UK to around 5,000 students.
"The data show a volatile recent history in student numbers from both India and China. STEM subjects that Indian students were most likely to study were the three which showed the greatest recent declines in numbers of new entrants: engineering and technology, computer sciences and subjects allied to medicine...
"It is important to note that both India and China are important markets for UK universities seeking to attract international students."
Lord Krebs, chair of the science and technology committee, blamed changes to the immigration rules having a direct impact on overseas students coming into the UK.
"When we really need to send the message that international STEM students will get a warm welcome in the UK, they're getting the cold shoulder and heading elsewhere."
Krebs said the rules are seen as too complex and subject to endless changes, the visa costs are not competitive, and the rules relating to work after study are so limiting that prospective students are heading to the US, Australia, Canada and elsewhere.
The government's claims that the decline in the strength of the rupee against the pound was contributing to the decline in the number of Indian students was dismissed by the committee as "not a major factor".
The latest report follows similar critical findings by the Higher Education Funding Council for England earlier this month, which revealed that the number of Indian students fell from 18,535 in 2010-11 to 13,250 in 2011-12 and further to 10,235 in 2012-13.
The Home Office dismissed the report's findings relating to immigration and student visa rules.
"We do not accept that the UK's immigration rules are deterring international students and there is no clear evidence in the report to support that argument," a Home Office statement said.