Yamaha plans to develop and manufacture its cheapest motorcycle globally in India and export the vehicles to countries including China.
The bike is expected to be priced at about US$500 (Dh1,836), about $200 less than its cheapest motorcycle today, according to the Japanese company.
The unveiling of its plans comes amid stiff competition and challenges in the motorcycle sector as well as India's wider motor vehicle industry, which experienced a sharp drop in sales last month.
Weaker economic growth, high interest rates and rising fuel prices have meant that the growth in motorbike sales in India have declined from the double-digit levels of recent years.
Motorcycle sales in India fell 6.96 per cent last month compared with the same month last year, according to data from the Society of Indian Automobile Manufacturers (Siam) released yesterday.
Car sales in India last month plunged 22.5 per cent, the data showed. India's car sales for the financial year to the end of last month fell 6.7 per cent, the first drop in sales in a decade.
Motorcycle companies moved to capitalise on the previously soaring growth in bike sales in India over the past few years, with the country being the second-largest market for motorcycles in the world after China.
Yamaha's budget bike is expected to be ready for its launch in a couple of years.
"India is very, very important for Yamaha," said Yuh Motoyama, a senior general manager at Yamaha.
"The reason for developing the products here is to be near the market to catch customer response better and also to respond faster," he told the Times of India.
Motorcycle sales in India are expected to improve going forward and there is significant scope for better growth in India, according to analysts.
"We expect two-wheelers to grow ... 9 per cent in the financial year 2014," CLSA said in a recent report.
Siam has forecast 6 to 8 per cent growth in motorcycle sales in this financial year.
India's market is dominated by Hero MotorCorp, which used to operate as a joint entity with Honda in India. The companies decided to dissolve their partnership more than two years ago and are now operating separately in the market as rivals. Figures show that Hero has more than a 50 per cent share of India's motorcycle market.