However as the cost of international education increases and the quality of domestic higher education institutions improve, more students are opting to stay in country.

The study reports that 21% of respondents favoured the UK as a study destination followed by 19% preferring the United States and 14% India.

“The focus of the Indian government on improving the volume and quality of higher education has positioned India’s own institutions as fierce competitors for domestic students”

The quality of education– including the institution’s reputation, access to world-class facilities and internship opportunities– was the most important factor when selecting a destination for 61% of respondents.

However, 65% said the high cost of study was the greatest deterrent of studying overseas- a factor further influenced by the depreciation of the rupee.

In August this year the rupee hit an all time low of 68.85 against the US dollar increasing the cost for Indian students to study oversea by roughly US $10,000 annually according to the report.

Elizabeth Shepherd, the British Council’s Education Intelligence Research Manager based in Hong Kong and the author of the report, says there will continue to be a segment of Indian households that can afford to finance overseas study and see it as a highly valued opportunity.

“However, this segment has decreased and may continue to do so, contrary to popular views of the boundless untapped potential in India for international students,” she said.

If the rupee continues at its current rate, potentially only 0.4% of households in India will be able to afford foreign study the report found.

UNESCO Institute for Statistics in 2009-10 show the total number of outbound Indian students was 200,621 but both the UK and US have seen a fall in numbers from Indian students in recent years, down 23% and 4% respectively.

The report proposes that the decreased spending power of households, stricter visa policies in the UK and the Indian government’s plan to provide quality education in the country have contributed to the decline.

The cost for Indian students to study oversea increased by roughly US $10,000 annually with the depreciation of the rupee

“The focus of the Indian government on improving the volume and quality of higher education has positioned India’s own institutions as fierce competitors for domestic students on an unprecedented scale,” commented Shepherd.

Though the increase in domestic education has disrupted traditional outbound flow of Indian students, the report concludes that there is still a “huge appetite” for international education opportunities across India among students interested in a clear return on their investment (ROI).

Twenty-seven per cent of respondents defined ROI as getting a well-paid job after graduation,  20% said it was becoming an expert in their chosen field while having their qualifications recognised globally by future employers was the pay out 15% hoped for.