MUMBAI (Reuters) - General Motors Corp <GM.N> said on Thursday it would invest more than $200 million in a powertrain plant in India, as the troubled U.S. carmaker aims to double its share of a fast-growing but increasingly competitive market.

The facility, which will be located in Talegaon in western Maharashtra state at the site of GM's second vehicle plant in India, will have an annual capacity of 160,000 units that can be expanded to 300,000 units, GM said in a statement.

The plant will make petrol and diesel engines and is expected to be completed in the first quarter of 2010, it said.

"We cannot remain a global industry leader without a strong presence in India," its India head Karl Slym said at a news conference to announce the signing of a memorandum of understanding with the state government.

"This will enable us to capture more opportunities in one of the fastest growing vehicle markets in the world," he said.

GM, which makes the Chevrolet-badged Tavera, Optra, Aveo and Spark in a plant in western Gujarat state, will have a capacity to make 140,000 vehicles in the new Talegaon car plant, taking its India capacity to more than 225,000 units.

"This is just one of a number of investments GM has made over the course of the last few years in emerging markets around the world and is an important component of GM's global strategy," Slym said, adding India investments have exceeded $1 billion.

The U.S. carmaker expects to double its market share in India to 10 percent by 2010.

GM will launch a new small car in India in the second half of 2009, Slym said, but it has no plan to take on Tata Motors' <TAMO.BO> mini Nano, billed as the world's cheapest car and scheduled for launch in October.

Bajaj Auto <BAJA.BO> is building a similarly priced 100,000-rupee ($2,283) car with Renault <RENA.PA> and Nissan Motor Co <7201.T>, while Toyota Motor <7203.T> will start production of a low-cost car in India in 2010.

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.

Maruti Suzuki India <MRTI.BO>, Hyundai Motor <005380.KS> and Tata Motors lead the market for small cars now.

GM's rival Ford Motor Co <F.N> said in May it had started operations at its engine assembly plant in Chennai in southern India, with an eventual capacity of 250,000 units.

($1=43.7 rupees)

(Editing by Ranjit Gangadharan)

By Rina Chandran