"The Ordnance Factory Board signed an MoU for a joint venture with Russian Rosoboronexport and Splav SPA to manufacture five versions of Smerch rockets based on the transfer of technology from Russia," the defence ministry said in a release.
More than two regiments of Smerch rockets have been in service in the Army after their induction about six years ago.
"Smerch rockets are technologically superior, having a range of 70-80 km. After indigenising the technology of Smerch rockets, OFB will attain new heights in the manufacturing of advanced rocket system," the ministry said.
It said the MoU approved by Defence Minister AK Antony was signed by the three sides on Monday.
Over the years, Russia has emerged as the largest supplier of weapons to the Indian armed forces.
The two sides have been discussing the local production of Smerch missiles for a long time now and it is believed that OFB, Ambajhari, will be the manufacturing agency.
The OFB, Ambajhari, is also involved in manufacturing a major chunk of the rockets of the Pinaka Multi-barrel Rocket Launchers.
The OFB is also working on the local production of 155mm 39 calibre Bofors artillery howitzers.