Festival organizers decided to cancel the video address to avoid violence by Muslim activists gathered at the Jaipur Literary Festival, an organizer, Sanjoy Roy, said.
"We have been pushed to the wall. ... Earlier today, a number of organisations came to us and threatened violence," Roy said.
Rushdie said he called off his trip after police told him of a possible assassination threat. He planned a video conference instead, but Roy said the organizers had been threatened with violence if they went ahead with the video link.
Rushdie's works include the Booker Prize-winning "Midnight's Children" and "The Satanic Verses," which some Muslims consider blasphemous.
Scores of protesters crowded the tent where hundreds of festival participants had gathered for the video conference.
The controversy over Rushdie's attendance cast its shadow over the five-day festival, which was attended by tens of thousands of people who came to this city to see Oprah Winfrey and literary stars, such as Michael Ondaatje, Tom Stoppard and Tiger Mom Amy Chua.
