The Spaniard had to pull out of the tournament with a recurrence of the hip injury which forced him to retire in the Australian Open quarter-finals in January.
And that leaves Federer as the clear favourite to claim a sixth overall Indian Wells title and his second in as many years having beaten Stan Wawrinka in the final in Southern California in 2017.
Federer seeks to extend a winning run that has seen him win all 12 of his matches since this season, dropping just two sets along the way.
But he must reach at least the semi-finals of the hard-court competition to protect his status as world No 1.
Despite his withdrawal, Nadal only drops 90 points in the ATP rankings after crashing out in the fourth round to Federer last year.
And that means the Swiss ace – defending 1,000 points – must at least reach the semi-finals to hang on to top spot.
If he is eliminated any earlier, Nadal will return to No 1 for the fifth time in his career when the ratings update on March 19.
The 20-time Grand Slam champion returned to the summit for the first time in five years and became the oldest ever player at No 1 after his Rotterdam Open success last month.
But he rejected a Dubai Duty Free Tennis Championships wildcard in favour of a break ahead of Indian Wells and Miami, where he is defending champion in both.
Though Federer is the favourite, Indian Wells boasts a competitive field including all of the top-10 except Nadal and No 7 David Goffin, the last man he lost to at the ATP Finals back in November.
Novak Djokovic, having slipped down to No 13 after an elbow injury suffered that has kept him out since Melbourne, also makes his return and could stand in Federer’s way of a 98th career singles title.
The Serbian is the only other player with five Indian Wells titles, beating Federer in the final in both 2014 and 2015.
But Federer could become the most successful player in the event’s history if he were to win here.
Elsewhere, Great Britain’s Kyle Edmund, who surpassed Andy Murray to become British No 1, is competing for the first time since reaching the Australian Open semi-finals.
But all eyes promise to once again be on Federer, whose campaign begins in the second round on Saturday March 10.