The green light from the Ministry of Home Affairs, confirmed by an official on Wednesday, comes 19 months after Huawei first applied for a manufacturing licence, amid wrangling over national security concerns. It also marks a significant boost for Prime Minister Narendra Modi's 'Make in India' campaign.
"India is an important overseas market for Huawei," Allen Wang, president of Huawei's consumer business group in India, told Reuters on Wednesday. "We aim to become a top three brand in India within three years."
A spokesman for Huawei in India said separately the firm had not received official communication from the government, and declined to comment further.
Huawei's clearance to manufacture telecoms gear comes as a number of China's largest phone makers, including Huawei itself, have indicated they are keen to supply locally made products to India's fast-growing mobile market, which has more than 975 million mobile phone subscriptions.
Close to 150 million subscribers use Internet-friendly smartphones, a number that's forecast to grow about 26 percent annually until 2019, according to a recent HSBC report.
Pending final approvals, Huawei would become the first big-name Chinese phone maker to manufacture hardware in India's growing market to helping compensate for slowing growth at home. Xiaomi Inc, China's leading smartphone maker, earlier this month reported a sequential drop in half-year sales.
Huawei already has research and development operations in India, and manufactures for export in the southern state of Tamil Nadu. Setting up local research and production centres is seen as key to helping Chinese firms offer top-end features at even lower cost to India's price-sensitive consumers.
The green light for Huawei comes two months after Prime Minister Modi visited China in an effort to promote stronger business ties. China's ambassador to India told Reuters earlier this year that tough security reviews and visa restrictions were slowing investment, despite Modi's promise to roll out the red carpet to foreign business.
India has been a testing ground for Chinese firms like Lenovo Group Ltd and others, trying out new products and strategies. Chinese producers are beginning to win market share from better-known rivals such as South Korea's Samsung Electronics Co and homegrown supplier Micromax.
© Thomson Reuters 2015