Fitch Ratings has said fundamentals of the Indian textiles industry are changing and the sector seems to be on a comeback trail aided by government policies and buoyant exports in 2002-03.

"There is a conscious effort to expand and modernise, key to achieving economies of scale and becoming internationally competitive. With competitiveness of the organised sector being restored and terms of world trade in textiles shifting in India's favour, the sector has started attracting investments," Fitch said in its report released on Monday.

Fitch Ratings director R Jayakumar said though late, the government has recognised that the emerging global challenges cannot be met on the strength of the decentralised sector.

"There is an increasing realisation among policy makers for the need to make organised industry competitive and the need to channel large investments into the industry," he said.

The last three Union Budgets have reflected a change in mindset aimed at addressing the structural anomalies in the industry, he added.

Fitch said there was a need for further reforms to correct the distortions caused by duty structure and the labour laws, and investments still need to be made in weaving and processing.

Global challenges for the Indian textile industry have been posed by the phasing out of the Multi Fibre Arrangement and the removal of Quantitative Restrictions by the end of 2004, which would mark a watershed in international trade of textiles.