A Confederation of Indian Textile Industry-CRISIL study has pointed out that realising the full potential of the textile sector in India would entail investments to the tune of nearly US$ 43 billion for capacity building in various segments of the industry, both in terms of modernisation and expansion. The share of textiles in Foreign Direct Investments has been less than 2% since 1991-92, when significant FDI inflow into India started. The penetration of FDI in textiles has been lower than many of the other manufacturing sectors, like chemicals, food processing, engineering, transport, other infrastructure, etc. The primary reasons behind this low penetration are the rigid labour laws, poor track record of returns to capital in this sector and reservation for unorganised sector of important textile segments for too long. In order to create a conducive atmosphere for greater flow of domestic and foreign investment, India should strive to reduce cost of capital, improve infrastructure constraints and relax operational rigidities. 

Let us ponder over some financial aspects of China. Corporate credit is cheaper in China than India, reducing the cost of debt. China has greater financial depth -- financial assets equal 220% of GDP, while India's is just 160%. China's financial system intermediates a greater proportion of the country's savings and investment -- generating more economic growth. China's banks account for around 70% of its financial assets and provide more than 95% of new corporate financing. A large part of India's financing is through the informal sector --has a modest-sized banking sector, but a large and growing equity market and a sizable government bond market. The abundance of credit in China explains its higher levels of investment and growth. So, the financial challenges can be summed up thus: Reduce further the government intervention in the financial sector; Strengthen its market orientation; and, allocate capital efficiently.