Ultra low cost phones — less than 2,000 rupees ($ 50) — are fuelling demand in cost-sensitive India, where more than 4 million new users are entering the 85.4 million strong wireless sector each month.

The number of mobile services users surged 47 percent in 2005, and now exceeds the population of Germany. India is expected to be the world’s third largest mobile market by the end of this year, behind China and the United States.

"We anticipate that there will be a long-term sustainable demand for mobile telephony in the fast-growing Indian market," Chief Executive Jorma Ollila said at the launch of the plant in Sriperumbudur, on the outskirts of the southern city of Chennai.

"I am confident that our manufacturing facility in Chennai will enable us to reduce our time to market."

Nokia plans to invest about $ 150 million in the plant, which will support growing demand for handsets and network infrastructure in the Asia-Pacific region.

"We wish to reach a figure of 500 million telephone lines by 2010," said telecommunications ministry secretary J.S. Sarma.

Nokia said its two suppliers, Aspocomp group and Perlos Corp. , will invest $ 70 million and $ 12 million respectively to set up a printed circuit board facility and a mechanics factory.

The plant in Sriperumbudur is the is the Finnish giant’s fourth handset factory in Asia and 10th globally and Chennai is fast becoming a magnet for highend hardware manufacturing.

It has already produced more than 1 million handsets since it began production in January. The factory, in an 85-hectare (210acre) Nokia Telecom Industry Park, has 1,100 workers and is expected to generate employment for a total 10,000 in the park.

More than 53 million handsets are expected to be sold in Asia’s third largest economy in 2006, up from 31 million last year. local mobile calls, at just a few cents a minute, are driving the market where the user base is expected to rise to 278 million by 2010.