Car sales in India rose an annual 34% in October, the fastest rise since February 2007, according to figures released by the Society of Indian Automobile Manufacturers (SIAM).

The figures caused observers to predict that the industry is back on track for healthy growth.

A total of 132,615 cars were sold during the festival month of October as credit began to ease. This compares with 99,052 units sold a year ago.

Demand was also stoked by a US$4bn payout to government employees as back pay in September, ahead of Diwali, the Indian festival of lights which is an auspicious time for purchases.

Analysts now predict that Indian passenger car sales will rise 8-10% in the fiscal year to March 2010.

Last fiscal year, to March 2009, sales were 1.55m, roughly the same as the previous year.

Indian carmakers have sold 821,954 units so far this year, 17.5% more than the same period last year.

SIAM figures also show that sales of trucks and buses rose 52% to 42,562 units in October, the fourth straight rise and the strongest expansion since April 2007 when they grew 71.5%.