India's car sales jumped by 23 percent in October -- the fastest rate in nearly two years -- industry data shows, driven by greater demand during the festival season and a slew of new model launches.
Some 172,459 cars were sold in October, up 23.1 percent from the same month a year earlier, according to a Society of Indian Automobile Manufacturers (SIAM) report.
"The rate we have seen in October is the best since January 2011 when we had 25 percent growth," SIAM director general Vishnu Mathur said.
SIAM recently slashed its projected car sales growth for the financial year to March 2013 to between one and three percent from an earlier 10 to 12 percent forecast due to the economic slowdown, higher import tariffs and labour trouble at the country's biggest passenger carmaker Maruti Suzuki.
Mathur said seasonal factors helped spur the October rise -- the religious holidays are seen as an auspicious time to buy in India, along with a raft of new models rolling off assembly lines.
But he said the real test of the auto sector's health -- regarded as an important barometer of overall economic performance -- will come once the festival season was over.
India has been one of the world's fastest-growing car markets in recent years.
But it has been suffering a slowdown in demand as some buyers defer purchases due to expensive loans, high fuel costs and a downturn in economic growth that is making consumers wary of making big-ticket purchases.
"The next months will be very important (to the auto outlook)," Mathur said, citing still high interest rates to counter stubbornly high inflation that has kept borrowing costs elevated as well as the overall economic weakness.
India's market outlook is of vital importance to global automakers from GM to Toyota, which have been steering to India and China with their billion-plus populations to boost sales and counter sluggish demand in developed nations.