Paramount already has a joint assembly plant in Azerbaijan.
Leyland and Paramount inked a deal at Defexpo 2010 in New Delhi last week.
The terms of agreement says the two companies will manufacture mine-protected armoured vehicles at a joint plant to be constructed in India, an African daily reported quoting an unnamed Paramount spokesman.
Ashok Leyland will invest more than $ 10m in the plant over the next year before the first vehicle comes off the line.
"Initially basic components manufactured in South Africa would be used to assemble the vehicles in India before the production line there starts making all components," the report said.
The new vehicle, dubbed Stallion, will combine the specification of two Paramount mine-resistant vehicles, the Marauder and the Matador, with the Ashok Leyland's basic four-wheel drive military vehicles.
Paramount is one of South Africa's leading defence systems contractors, providing defence, peace-keeping and internal security solutions to government agencies worldwide.