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Industry group cuts India car sales forecast

Associated Press Modified: October 10, 2012 at 6:46 am •  Published: October 10, 2012

Vehicle finance rates remain high. India's central bank has shied from rate cuts because of persistent inflation despite a tailspin in economic activity. Car loans carry interest rates of 11.4 percent to 15.3 percent, while commercial vehicle loans charge 14.7 percent to 19.3 percent in interest, SIAM said.

In its push to reduce the fiscal deficit, India has reduced fuel subsidies. That, plus rising prices, is pushing the cost of vehicle ownership up by 3 to 5 percent, the auto group said.

The International Monetary Fund on Tuesday slashed its growth forecast for India's economy to 4.9 percent from 6.1 percent.

New Delhi has belatedly pushed through measures intended to stoke growth and reassure investors, including opening retailing and airlines to greater foreign investment.

Standard and Poor's said Wednesday that India still faces a one in three chance of a sovereign credit downgrade in the next 24 months, despite the flurry of reform.