India's domestic passenger car sales surged 18.1% in July, as robust economic growth, cheap finance deals and discounts continued to power demand in Asia's fourth largest economy, industry data reportedly showed on Friday.

According to Reuters, the Society of Indian Automobile Manufacturers (SIAM) said in a statement that sales of 11 carmakers rose to 70,589 units in July, up from 59,784 in the same month a year ago. Sales in April-July, the first four months of the business year, rose 20.5% to 252,525 units from 209,508 a year ago.

"The sentiment for the future has turned slightly adverse owing to concerns over inflation, oil prices and GDP growth. But the car industry should still end the year with 10-12% growth," Umesh Karne, analyst at brokerage Sushil Finance, told the news agency.

Reuters noted that annual wholesale price inflation in India hit a 3-½ year high in the week ended July 31 to 7.61%, adding to fears of a potential interest rate rise in the near term. Economic growth in 2004-2005 also is expected to slow from the previous year's 8.2% on forecast of flat farm output.

The news agency said India's domestic car sales surged 28.6% in the 2003-2004 business year after averaging flat growth in the past three years. A tax cut in 2003 helped automakers lower prices by more than 5% in the price-sensitive market.

New model launches and discounts and freebies offered by automakers in a hotly competitive market helped boost sales. Nearly 90% of new cars bought use vehicle financing, Reuters added.

The report said SIAM's data showed sales of market leader Maruti Udyog Ltd., 54.2% owned by Japan's Suzuki Motor Corp., rose 10.8% in the month to 34,722 units. Maruti has a dominant 51.4% share of India's market helped by its small, low-priced cars.

Domestic car sales of second-ranked Hyundai Motor jumped 16.4% in the month to 12,958 units, while No. 3 Tata Motors Ltd, reported a 32.2% rise, Reuters said.

The news agency noted India's car industry is forecast to expand by at least 10% annually this decade, aided by rising incomes and lower ownership levels that have attracted several global firms.

Only eight of every 1,000 citizens own a car in India, compared with 35 in Thailand and 450 in the developed world, the report added.