To support the Japanese auto maker's production, about 10 parts suppliers from Japan will also start local operations, bringing the group's total investment to around 100 billion yen, said the Japanese business daily, formerly called Nihon Keizai Shimbun, without citing sources.
The plant will begin operations in 2009.
Production will mostly centre on a new compact car with an engine displacement of around 1000cc. About one-third will be sold in India, and the rest exported to Europe and other regions, the paper said.
Nissan is considering whether to participate in a joint project between France's Renault SA and Indian utility and tractor maker Mahindra&Mahindra Ltd., which are due to build a plant to assemble 500,000 cars a year from mid-2009. Renault holds 44 percent of Nissan.
Nissan has said it would make a decision by the beginning of March.
The Nikkei said Nissan would still take a stake in the Renault-Mahindra venture, but had decided that India's fast-growing car market warranted a plant of its own, especially in light of export possibilities due to cheap production costs, the paper said.
Nissan's plant, whose location will be finalised this month, would gradually add more models, eventually expanding its annual capacity to 400,000 units, the paper said. Two or three port cities in the west and south have been shortlisted for the site.
Under its mid-term plan, Nissan is looking for cheap production and parts procurement sites which it calls LCC, or leading competitive countries, and has earmarked India as a candidate example, along with China.
Among its group suppliers, Calsonic Kansei Corp. is due to invest as much as 5 billion yen for a factory to produce air-conditioning units and other parts, the Nikkei said.
India's passenger vehicle market in Asia's fourth-biggest economy is forecast to double to 2 million units by 2010.
Nissan has been looking for a way into the burgeoning Indian market, where Japan's Suzuki Motor Corp. and Honda Motor Co. have a sizeable presence.
Nissan has an agreement under with Suzuki is to supply Nissan with a new small car on an original equipment manufacturing (OEM) basis, mostly for export to Europe starting in 2008. In November, it called off discussions to form a separate joint manufacturing project in India with Suzuki.
Toyota Motor Corp., which is set to become the world's biggest auto maker this year, is also looking to develop a low-cost passenger vehicle to boost its limited presence in India and challenge the dominance of Maruti Udyog Ltd., a unit of Suzuki.