Ford has laid the cornerstone for a new US$1bn factory in India which will have the capacity to manufacture 240,000 cars and 270,000 engines a year when completed in 2014.

The 460-acre site is at Sanand in the Indian state of Gujarat.

Ford's expansion of its Indian operations comes despite slowing car sales in the country. So far this fiscal year ending 31 March, car sales have crept up just 0.3%, against a surge of almost 30% last year.

The company is confident for the future, however. Local MD Michael Boneham said: "We are committed to significantly increasing our manufacturing output and aggressively expanding our business in India.”

The slow in sales was caused by tax hikes and high interest rates, driven by the central bank's attempts to control inflation, while the government expects India's economy to grow 6.9% this fiscal year versus 8.4% last year.

Ford's passenger vehicle sales for the fiscal April to February period fell 5% year on year to 83,639 vehicles following a period of strong growth thanks to the popularity of the affordable compact Figo model.

Ford plans to launch eight vehicles in India, where it has invested around US$2bn, by the middle of the decade.

Analysts predict India's growth will bounce back, as the economy grows and interest rates fall, with sales of passenger cars and light trucks set to more than double in the next eight years, reaching 6.2m units by 2019.