Domestic smartphone company Micromax will start producing all its handsets in India by 2018 as production costs rise in China, its co-founder Rahul Sharma said.

Currently, the Gurgaon-based Micromax carries out less than two-thirds of its assembly operations in India and shifting back the overall manufacturing activity to the country makes "economic sense" due to rising labour costs in China and a growing number of component suppliers in India, he said.

"In the next 24 months 100 percent will be here. There was no ecosystem in India. Slowly, slowly we are attracting one," Sharma told Reuters in an interview this week. "In terms of manpower, India is far cheaper (than China)."

Earlier this month, Micromax had said that it would invest 3 billion rupees ($45 million) towards setting up new manufacturing plans in India in a bid to reduce imports from China.

Founded in 2008, Micromax has witnessed a phenomenal growth in the low-cost smartphone segment to become the second biggest smartphone seller in India next only to South Korea's Samsung. It earned revenue of over Rs 11,000 cross in the previous fiscal year ending March 2015.

With the number of smartphone users growing rapidly in the country, India is forecast to overtake the US as the second largest smartphone market globally by 2017.

The South Asian country is estimated to see smartphone sales of 174 million units in 2017, surpassing the sales in the US market, according to research firm Strategy Analytics.

In April, Micromax had said that it was planning to raise capital from investors or issuing an initial public offer (IPO) to meet its expansion plans.

At present, the company is not looking to raise fresh equity or debt capital, said Sharma, refusing to comment on the talks with investor.

"We are cash positive. We don't need it (funding)," he said.

The promoters Rahul Sharma, Rajesh Agarwal, Sumeet Kumar and Vikas Jain account for about 80% of the stake in the company.