Car sales in India rose an annual 2.5% in May, climbing for the fourth consecutive month, following the introduction of interest rate cuts and stimulus packages although the Society of Indian Automobile Manufacturers (SIAM) warned that high borrowing costs and the effects of tax cuts were waning.

SIAM was concerned that growth would fade and even turn to decline later in the year but sales of 113,490 cars in May was up from 110,745 a year ago. Sales of trucks and buses, which are more dependent on economic activity, fell for a 10th straight month, down 14.8% in May to 30,800 units.

SIAM predicted a further fall in track and bus sales this month.

Reuters noted that India's economy grew 6.7% in the fiscal year ended March, its weakest pace in six years, on the back of the global economic crisis. The central bank expected growth to further slow to 6% in 2009/10.

Manufacturing was weak in the March quarter, posting a 1.4% contraction after having risen 0.9% in the December quarter.

Car sales in India, dominated by Maruti Suzuki, 54.2% owned by Suzuki Motor, have been rising since February after the government reduced factory gate duties and interest rates.

Maruti, which accounts for half the cars sold in India, earlier reported May sales up 15.8% year on year to 79,872 but Tata Motors' passenger vehicles sales fell 16%.