Xiaomi had entered India in July 2014 and started local manufacturing just over a year later. The new facility will be exclusive to Xiaomi, while the older one may see Foxconn making handsets for other vendors too.
While the company declined to comment on the investment details, it said Xiaomi will be able to make "one phone per second in India".
"While I cannot disclose the exact capacity, I can tell you that we will be able to manufacture one phone per second whenever the lines are running. The two factories combined will provide employment to about 5,000 people, 90 per cent of which are women," Xiaomi India Head Manu Jain said.
The move will help Xiaomi meet about 95 per cent of its demand in India from these two facilities.
However, it will continue to import accessories, ecosystem products and its premium product, Mi5 from China.
According to research firm IDC, Xiaomi had a 10.7 per cent share of the Indian market, putting the company just behind Samsung (over 25 per cent share) at the end of December quarter.
"The smartphone market in India will grow from 110 million units per annum to 200 million plus units, in 3-5 years, Jain added.
The company has also launched a new device - Redmi 4A - that will also be manufactured at the Indian facilities.
Priced at Rs 5,999, the 4G-enabled Redmi 4A will help the company compete aggressively in the sub Rs 7,000 category that is primarily dominated by Indian players like Micromax.
It features a high capacity battery, Qualcomm Snapdragon 425 processor and a 13MP camera.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)