The vehicle will likely be powered by a one-litre engine and priced at less than $7 200 (about R43 000).
The car will be developed in Japan, exploiting the expertise of Toyota group mini-vehicle specialist Daihatsu, the newspaper said without identifying its sources.
Savings will be achieved by keeping parts and materials costs low in addition to manufacturing the car and procuring parts mainly in emerging markets, the Nihon Keizai reported.
After India, the vehicle will be released in Central and South America as well as Central and Eastern Europe, it said.
Toyota plans to sell about 10.3 million vehicles in 2010 to become the biggest carmaker in the world, replacing US giant General Motors.