The facility, that will be located in Talegaon in western Maharashtra state, at the site of GM's second vehicle plant, will have an annual capacity of 160,000 units, which can be expanded to 300,000 units, GM said in a statement.
The engine plant was expected to be completed in the first quarter of 2010, it said.
GM, which makes the Chevrolet-badged Tavera, Optra, Aveo and Spark, will have a capacity to make 140,000 vehicles in the new Talegaon plant that is scheduled to start operations next week, taking its all-India capacity to more than 225,000 units.
GM will also make a new small car in Talegaon. Annual passenger vehicle sales in India are forecast to expand to more than 2 million units by 2010, with small cars accounting for more than two-thirds of sales.