The Australian has not played since her surprise third-round defeat to Shelby Rogers at the US Open last month.
Barty follows four-time grand slam champion Naomi Osaka in pulling out of the California event, the final WTA 1000 tournament of the year.
The 25 year-old had indicated after her defeat at Flushing Meadows that she planned to play at Indian Wells.
Defending champion Bianca Andreescu heads a strong field, with world number two Aryna Sabalenka, Wimbledon finalist Karolina Pliskova, French Open champion Barbora Krejcikova, Olympic bronze medalist Elina Svitolina and last year's Australian Open champion Sofia Kenin all taking part.
Three other previous winners – Simona Halep, Elena Vesnina and Victoria Azarenka – will also be present, along with teenager Leylah Fernandez, who reached the US Open final.