The number of American students studying foreign languages has declined so sharply over the past decade that the nation has developed a "scandalous incompetence" in foreign langages harmful to the U.S. economy and the conduct of foreign policy, a presidential commission said yesterday.

To reverse the decline, the panel recommended a major new federal program of grants for students and teachers, support for selective high schools that specialize in foreign languages and the development of nationwide tests to measure language proficiency.

The incentive grants, ranging from $20 to $65 a year for each student enrolled in language courses, would cost about $51 million annually, the commission said.

James A. Perkins, the former Cornell University president who chaired 25-member commission, said the proposal would cost $180 million a year, starting in 1981. But he said the money would be well spent because there is "a direct connection between our linguistic capabilities and our economic circumstances," particularly in light of America's large international trade deficit.

"The general notion that if you speak English everybody else does is hopelessly untrue," Perkins said at a news conference in the Cannon House Office Building. "America now is being seriously damaged by the extent to which we have been neglecting our foreign language capability."

Stuart Eizenstat, President Carter's chief domestic affairs adviser, appeared at the news conference and said he expects the new Department of Education to "take the recommendations. . . to heart." But Eizenstat declined to endorse proposals calling for federal aid, saying they would be given "careful consideration in the budgetary process."

In its report the commission also asked for increased federal funding for advanced university programs in international studies, both in the United States and abroad. Some of them, it said, "are in danger of imminent collapse.'

The commission suggested that universities restore their foreign language requirements for undergraduates, but acknowledged that the government could only encourage them to do so.

Rep. Paul Simon (D-III.), who proposed creation of the commission as a natural outgrowth of the 1975 Helsinki accords, said the drop in university language requirements explained much of the drop in language study.

Only 8 percent of U.S. colleges now require some degree of competence in a foreign language for admission, the commission said, compared with 34 percent in 1966. According to the Modern Language Association, just 53 percent of all colleges require any study of a foreign language to receive a bachelor's degree, compared with 89 percent in the mid-1960s.

The number of college students taking foreign language courses dropped by about 200,000 from 1968 to 1977, despite a 3 million increase in student enrollment.

In public secondary schools, language course enrollment dropped from 4.8 million nationally in 1968 to 3.8 million in 1976, the latest year for which statistics are available from the American Council on the Teaching of Foreign Languages.

The commission said 15 percent of U.S. high school students study a foreign language, down from 24 percent in 1965.