Xiaomi starts making phones in India through partnership with Apple supplier Foxconn

China's Xiaomi has joined forces with Taiwan-based tech giant Foxconn to start assembling phones in India, seeking to cut costs and grab a bigger slice of the world's third-largest smartphone market.

The factory, in the southern state of Andhra Pradesh, is a boost for prime minister Narendra Modi, who has championed a campaign to turn India into a manufacturing powerhouse to boost economic growth and create much-needed employment.

India is the world's fastest growing smartphone market, but so far a lack of good suppliers and infrastructure have hampered efforts to manufacture phones in the country, forcing most of India's more than 100 different phone companies to import from China and Taiwan.

From Monday, the south Indian assembly line will roll out Xiaomi's first locally made smartphone, the Redmi2 Prime, an India-specific upgrade to its best-selling Redmi2 budget smartphone. It will be sold at 6,999 rupees (US$110), company executives said.

Neither Xiaomi nor contract electronics maker Foxconn disclosed the size of their investment or future production capacity.

The Indian market, which Xiaomi entered in July 2014, has fast become its second-largest, as the company's low-priced phones find favour with young and cost-conscious customers.