Bajaj Auto unveiled India's latest ultra-low-cost car on Tuesday, a 200cc four-seater that looks set to compete with the Tata Nano for the title of the world's cheapest auto.

The group gave no price for the low-emission vehicle which will have a top speed of 70 kilometres an hour (43 miles an hour), but the build quality indicated it was pitched firmly at the bottom of the market.

The "RE60" is the first foray into the passenger car market by Bajaj, a motorbike and rickshaw specialist which entered into an ultimately aborted alliance with Nissan and Renault in 2009 to develop the vehicle.

Group managing director Rajiv Bajaj said the core market for the RE60 would be owners of three-wheeled motorised rickshaws who wanted to upgrade to four wheels, but it was also for anyone who "wanted to take it home."

One of the models on display was fitted with a taxi meter, an indication that Bajaj hopes the snub-nosed car with small wheels might replace India's iconic rickshaw as the commercial passenger vehicle of choice.

Marketing material aired at the launch also showed the RE60 as a mass market product pitched at urban commuters, with the emphasis placed on its extremely high fuel efficiency and its low carbon dioxide emissions.

"At Bajaj Auto, we believe the people of the planet deserve much better, much faster," Bajaj said of the car, which will be launched some time this year.

The petrol engine will do 35 kilometres per litre (83 miles per US gallon) in normal driving conditions and emits just 60 grams of carbon dioxide per kilometre, the company said. It weighs just 400 kilograms (880 pounds).

Bajaj said that emissions were "typically half of what the small cars currently emit in our market."

India has become a centre of low-cost innovation exemplified by the Tata Nano, which was launched to great fanfare in 2009 as a means for poor families to get their hands on their first car.

A no-frills model costs as little as 140,880 rupees ($2,770).

Other innovations in India targeting the hundreds of millions at the bottom of the economic pyramid include a low-energy refrigerator, a low-cost water purifier and solar-powered ATM cash machines for rural areas.

But the Nano has so far failed to take off as expected, with analysts blaming poor marketing by the company which sold it as a cheap product rather than an aspirational one for the burgeoning middle classes.

There have also been a series of technical problems, as well as some highly publicised engine fires, meaning sales have been a fraction of the 25,000 a month the company once expected.

Parent company Tata Motors reported this week it had sold 7,466 Nanos in December, a rise of 29 percent from the same month last year.

Bajaj took several digs at the car during his presentation, saying "I am personally not sure what the Nano is."

Bajaj, Renault and Nissan abandoned their joint low-cost car project in July last year amid differences over the direction of the project.

Renault had voiced concern about the quality of the final product.

Small, fuel efficient cars are set to take centre stage at the India Auto Show which kicks off Thursday in New Delhi, while luxury brands such as BMW will look to increase their presence in a market that is one of the few global hotspots.

The Indian market is forecast to grow this financial year to March but at a slower rate than earlier forecast as the economy slows due to higher borrowing costs and global economic troubles.

The Society of Indian Automobile Manufacturers has sharply cut its forecast for Indian car sales growth in the fiscal year to between two and four percent, down from an earlier projection of 10-12 percent.