From the beginning, the cotton textile industry has been the keystone of Pakistan’s industrial development. In both the large scale (more than 1U employees) and the small scale sectors, cotton textiles is the single most important industry in terms of both the value of output and employment. Cotton textiles account for more than 15 percent of all exports and a much higher share of manufactured exports. While the importance of textiles has diminished with the spread of industrialization to other sectors, the predominance of textiles in manufacturing employment, value added and exports is likely to continue for some time. As Pakistan prepares to launch its Fifth Five-Year plan, it is useful to examine the growth prospects for the cotton textile industry. Having long ago replaced imports of cotton textiles by domestic production, Pakistan must now look to the expansion of foreign market for textiles or at least Pakistan’s share in the market-and to the growth of the home market to absorb any planned growth in productive capacity. With the uncertainties in the world market, and especially the current recessionary slump in the developed economies the aftermath of which is likely to be felt for some time, especially in the form of new quantitative restrictions against textile and other manufactured imports coming from developing countries -the future growth in demand for Pakistan’s exports is very problematic. Over the decade of the 1960’s, textile exports grew in real terms by more than 20 percent per annum. From 1970 to 1974 the trend rate fell to less than 5 percent per annum with considerable fluctuations in the rate of increase from year to year. Of course, there always remains the possibility that Pakistan can expand her share of the foreign market sufficiently to offset any decline in world demand, but the existence of the country-specific quotas on textile products in many of the importing countries may prove a serious constraint in this regard.