"It can help for the empowerment of people who do not have enough so I celebrate it for them," an emotional Mishra told AFP after receiving the award from a star-studded jury including Gucci's creative director Frida Giannini.
The annual prize, sponsored by the Australian wool industry, was first awarded to Yves Saint Laurent and Karl Lagerfeld in 1954 and is held in a different fashion capital every year.
Mishra's subtle and entrancing collection featured lotus and cityscape wool-embroidered patterns and the palette was entirely of whites and yellows.
"My biggest inspiration came from Buddha's idea that a lotus is an embryo of the world. I'm a story teller, I love telling stories!" he smiled, explaining the designs were intended as "a journey".
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Mishra, who is known for his support for the Indian handloom industry and sustainable design advocacy, said the prize would be a boost for the sector.
"There are a lot of craftsmen and a lot of young designers out there who will believe in the craft even more," he said.
In 2009, he became the first non-European designer to win a scholarship at Milan's Istituto Marangoni fashion school.
Asked about his plans, Mishra said he wanted a catwalk at one of the fashion weeks in London, Milan, New York or Paris "and to be able to create big business for me and for my people.