India’s mobile handset production is growing fast, fueled by rapid growth in the number of mobile subscribers in the country.

India produced nearly 31 million mobile phones last year, at a value of about $5 billion, according to a report by Gartner. The research firm expects production volumes to reach nearly 95 million and to register a compound annual growth rate of 25 percent between 2006 and 2011.

Growth in handset production in India this year, at 68 percent by units and 65 percent by value, is forecast to be the highest in the Asia-Pacific region, Gartner said.

Mobile phone manufacturing was the largest contributor to the country's overall electronics production revenue last year, and to the total available market for semiconductors, Gartner said.

India’s mobile market is booming. The country added 6.57 million mobile subscribers in May this year, taking the total number of subscribers to 178 million, according to the Telecom Regulatory Authority of India in Delhi. The country added 6.11 million new mobile subscribers in April.

A number of multinational handset makers, including Nokia, have set up manufacturing facilities in India. Sony Ericsson is outsourcing mobile phone manufacturing to the operations in Chennai of Flextronics and Hon Hai Precision Industry, which uses the brand name Foxconn.

The decision by these vendors to make phones locally was also influenced by the decision of Bharat Sanchar Nigam, a large government-owned services provider, to insist on local manufacture by its suppliers.

While the top five handset makers worldwide will retain a major share of production volume, local manufacturers are expected to capture up to a fifth of India's overall mobile phone production volume by the end of 2011, Gartner said. Growing demand for low-cost and ultra-low-cost mobile phones, and the need for EMS (electronics manufacturing services) vendors to reduce their revenue exposure to large multinational vendors, will contribute to the growth of local-brand mobile phones in the Indian market, it added.

Reliance Communications, a large Indian services provider, already offers its own brand mobile phones, called the Classic range. The products are currently being customized and made by contract manufacturers outside India, a company spokesman said Monday. A low-cost model launched by Reliance at about $19 in May sold 1 million units in the first week, he added. The spokesman did not however comment on whether Reliance had plans to move manufacturing to India.