Dubbed 'Etios', the sub-light compact hatch is aimed at markets that include India, Russia, Latin America and other emerging markets that are quickly replacing major Western markets as a key battleground for car manufacturers.
"India will play a pivotal role in Toyota's global expansion plans and the time has come for us to strategically accelerate our growth here," Toyota Vice Chairman Mr Kazuo Okamoto said.
Driven by the world's second-largest population, government incentives and a relatively strong domestic economy, Indian car sales are set to grow about 16 per cent this year to 1.4 million vehicles, after posting double-digit growth through most of 2009.
"With the introduction of Etios, we hope to attain a sizeable market share in India in the shortest possible time," said Mr Sandeep Singh, deputy managing director of marketing at Toyota's local unit, Toyota Kirloskar Motor.
Toyota said more than 2,000 engineers in India and Japan worked for four years on the Etios, which is code-named EFC for entry family car.
The company did not specify a price range for the new model, which is expected to sell for "well under US$10,000" when it goes on sale later this year. Toyota expects annual sales of 70,000 units of the Etios in India as it looks to ramp up growth in the fast-growing market. Full specification details will be announced closer to the launch.