INDIAN students already living in Australia accounted for every second visa issued for vocational education and training, according to the latest official statistics.

In the second half of last year, onshore VET grants to Indians rose 84.5 per cent to 15,031, making up 46.7 per cent of the total.

Observers are puzzled about this trend because onshore demand was expected to shift to higher education, which offers better hope of permanent residency under reformed rules for skilled migration.

In 2010-11, there were 18,853 onshore grants of VET visas for Indians, making up 36.4 per cent of onshore VET grants, and representing 72.6 per cent growth on the previous year.

Grants of higher education visas to onshore Indians in 2010-11 rose just 7 per cent to reach 6371, accounting for 11.2 per cent of the total.

The picture offshore is quite different, with applications for higher education visas from India jumping 190 per cent to 3648 in the last six months of last year.

In this period, there was much publicity about the Knight visa reforms favouring higher education with easy visas and post-study work rights.

The surge in higher education demand from India could reflect a relaxation in the visa approval process in April last year, the Department of Immigration and Citizenship said in its student visa report for the December 2011 quarter.

Offshore demand collapsed after attacks on Indian students in mid-2009. In 2008-09 there were 22,364 offshore grants of higher education visas to Indians, falling to 5053 in 2009-10.

As for Indians already in Australia, many were expected to move from VET to higher education to increase their chances under new skilled migration rules, but demand for onshore VET visas continues to grow.

Industry sources said Indian students finishing VET courses had been able to secure further VET visas, courtesy of DIAC's online e-visa system and without interview.

DIAC used to insist such students upgrade to a higher education visa and a bachelor's program, these sources said.

Cheaper VET courses allowed these students to keep more of their earnings in the labour market to pay off the family debts incurred in expectation of permanent residency. "One wonders whether (Immigration Minister Chris) Bowen is telling his officials to back off -- allowing VET students to do more VET courses," said Monash University population researcher Bob Birrell.

Dr Birrell said students whose hopes of permanent residency had been dashed by rule changes were turning up in many visa categories as they tried to stay on in the workforce.

A DIAC spokesman said there was no leniency; it applied the same visa rules to everyone.

"There is no quota or cap on the number of student visas granted -- if applicants meet requirements, they will be granted a student visa," the spokesman said.

Sydney migration agent Jonathan Granger said it made sense for onshore Indians, victims of abrupt policy change in the past, to stay in cheap VET courses until the higher education benefits promised after the Knight review were guaranteed in regulations.

"There's complete lack of clarity on anything out of Knight. If there's uncertainty, people will move to VET and stay in VET," he said. "They can tread water at $1500 every three months (in VET fees)."

Claire Field, chief executive of the Australian Council for Private Education and Training, said she was "a little surprised" at the strength of onshore Indian VET numbers but "if anything the continued interest in VET study puts to bed the myth that Indian students weren't here for genuine reasons".

Under the old rules, VET courses such as cookery and hairdressing were quick, cheaper paths to PR, attracting many Indian students to Australia.

In February 2010, then immigration minister Chris Evans announced the end of the skilled migration system that sustained this business and heralded new rules giving higher education the edge in PR.

Yet universities have recruited only modest numbers of onshore Indian students. One reason might be that Indian VET students keen to stay on lacked the money or entry requirements for university, industry sources said.