By Rachel Sanderson

LONDON (Reuters) - As Indian Fashion Week hit full swing on Friday, one of its most noted designers, Manish Arora, strutted a catwalk in London in a show that underlined how much the industry is enamoured with the country.

Arora joined feted European designers Christian Dior and Jean Paul Gaultier in being invited to showcase his past catwalk collections at London's Victoria & Albert Museum, one of the world's foremost for the decorative arts.

The tribute comes as Europe's leading fashion houses clamour to enter India, which is one of the world's fastest-growing markets for luxury goods alongside China and Russia and also is holding its premier fashion event in New Delhi this week.

In a sign of the industry's eagerness to make lucrative gains there, fashion magazine Vogue is set to launch its first Indian edition next month.

Arora and contemporary Anamika will also unveil their latest collections in the world's fashion capital Paris in October, becoming the first Indians to do so. Another rising star Rajesh Pratap Singh is expected to show there from next season.

On Friday, against a backdrop of Raphael paintings, Arora filled a catwalk with models wearing 40 outfits from his past collections -- jackets, skirts and skin-tight trousers in rainbow colours and densely embroidered with animals and plants.

"To see people waiting in a long queue four times a day to see this is quite incredible," Arora, whose clothes are sold in London at Harrods, told Reuters TV after one runway show.

"It's a great privilege I must say, and me being the first Indian person to show at this museum, in this gallery, it's an absolute pleasure."

ABOUT TIME

Among those waiting in the line for Arora's show was Swetha Navayanaswamy, 28, a southern Indian-born lawyer who now works in London and had taken time off work to come.

Born in Chennai, she was wearing a black top set off with traditional Indian embroidery in blue. Navayanaswamy wanted to see how the designer managed to marry India's centuries old artisanship with the fashion world's hunger for novelty.

She also thought it was "about time" the fashion elite starting taking Indian design seriously.

"Handmade in India" was a phrase associated with cheap and cheerful textiles for a generation of Europeans and Americans.

But it was only a matter of time and economic growth before a new wave of Indian designers changed perceptions by producing sophisticated designs rooted in traditional craft skills.

The world's population of extremely wealthy people -- whose appetite for monogrammed luggage and $10,000 gowns is behind an unprecedented boom in luxury goods -- surged to 9.5 million last year, up 8.3 percent, with India leading the way, according to the latest Merrill Lynch Cap Gemini World Wealth Report.

Industry analysts expect European investors and fashion groups, like world leader LVMH, home of Louis Vuitton, sooner or later to snap up Indian fashion houses.

Oriole Cullen, curator for Arora's show, part of the V&A's "Fashion in Motion" series, said it was Indian design's moment.

"The skills never went away, but people coming from India with new ideas are now being given the space in the international fashion market to accomodate them. People are really excited to see what is coming out," she said.