The car maker had sold 1,585 units in 2016.
The company's highest ever retail sales performance comes on the back of a great year marked by exciting new product launches, successful start of local assembly, network expansion and exemplary brand engagement programmes, the company said in a statement.
"The year 2017 indeed has been a record year for us as we witnessed the introduction of some exciting products S60 Polestar, V90 Cross Country and the all new XC60," Volvo Auto India Managing Director Charles Frump said.
The company is on the track to double its segment share to 10 per cent by the end of 2020, he added.
"2018 looks even more exciting with a full year sales of the new XC60 and on exciting compact luxury SUV scheduled to be launched mid-year," Frump said.