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You have to add the contact to the People app. WhatsApp loads contacts from People app. Open People app an add the contact there. Then open WhatsApp tap More (three button) and tap Refresh. You will see the contact there.
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Yes, that is correct. The contacts you see on WhatsApp are actually the contacts you see on People app (the contacts database of your phone). After adding the contacts, you may need to do a refresh on WhatsApp to see the newly added contact.
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