Tata Motors will invest Rs 6,000 crore (Rs 60 billion) in its existing plants and for setting up vehicle testing facilities in Pune in the next four to five years.
The company signed a memorandum of understanding on Monday with the government of Maharashtra to this effect.
"This MoU with the Maharashtra government is a step towards realising Tata Motors' plans to augment capacity at Pune plants in order to meet ever-increasing customer expectations, and demands both in India and abroad," Tata Group Chairman Ratan Tata said on Monday.
The investment is expected to generate additional direct employment of 1,500 at full capacity.