A drop in the number of students from India, Saudi Arabia and the USA applying to study in Norwich is a warning signal, the University of East Anglia's vice chancellor said.

Edward Acton believes the Home Office's immigration policy – including plans to include international student numbers in a cap on numbers – is creating a hostile environment for overseas learners hoping to do a degree in Britain.

Having previously warned that policy would put off non-EU students – and impact on university finances, the local economy, and the cultural experience of their fellow learners – he now believes it has already started to happen.

Figures from the UEA's admissions department show the number of Indian students applying to study there dropped from 836 to 716 between 2010/11 and 2011/12. Numbers for this year remain more than 200 adrift of last year's total.

Applications from students from Saudi Arabia have also decreased markedly from 636 in 2010/11 to 542 in 2011/12 and just 398 so far this year, while the United States is also showing less interest.

But the number of Chinese students is continue to grow rapidly – from 4,203 in 2010/11 to 7,240 so far this year.

Prof Acton said that masked the more worrying figures elsewhere.

'UEA is bucking the trend but even UEA is seeing a decline in key markets,' he said. 'While China continues to grow, the overall numbers remain upwardly inclined, but the warning signals are very seriously flashing.'

The vice chancellor admitted the high number of Chinese students joining the university meant finances would remain healthy but said that was not the only benefit of welcoming international learners.

'At this university, we love students coming from China but neither they nor home students or other students want it to be disproportionate,' he said.

'Of course it's true from a narrow view of university finances but we are about much more than income. We're about providing the best experience of worldwide citizenship. The university also benefits from having alumni in the every county in the world with whom Britain wishes to trade.'

A UK Border Agency spokesman said: 'We want to attract the brightest and the best students to this country and those with the right qualifications and adequate English are welcome to study here.

'There is no limit on the number of overseas students who can come to the UK to study and recent figures show acceptances for international students is up 4pc this year.'