Slotting below the Rover 25 in the existing product line-up, it will be sold by MG Rover's dealer networks across the UK and Europe, and will be built at the Tata Engineering factory in Pune, India.
MG Rover says there will be modifications to the Indica to make it more appealing to Rover customers in Europe, although no further details will be revealed until the car is unveiled.
Kevin Howe, chief executive of MG Rover, said: 'This new car, which will fit perfectly into our existing product portfolio, will reach a whole new customer base. We are delighted to have concluded this manufacturing agreement with Tata Engineering. The Pune factory has state-of-the-art facilities and a highly skilled and dedicated workforce.'
The company says the new model will not be a replacement for the Rover 25.