India's car sales jumped by 8.3 per cent in June from a year earlier, an auto industry body reported Tuesday, adding it was still hoping for double-digit annual growth despite a flagging economy.

Car sales should rise by nine to 11 per cent for the year thanks to expected interest rate cuts that would reduce vehicle loan costs and spur demand, the Society of Indian Automobile Manufacturers (SIAM) said.

"We're hoping car demand will bounce back, possibly around the (religious) festival time" that begins in September when it is considered an auspicious time to buy, SIAM director general Vishnu Mathur told a news conference.

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.

India is the sixth-largest car market globally and is expected to be third behind China and the US by the end of the decade, consulting firm McKinsey says.

Some 155,763 cars were sold in June in India, up from 143,851 a year earlier, powered by market-leader Maruti Suzuki, according to SIAM.

The June jump was driven by hefty price discounts and a surge in demand for diesel models whose fuel is heavily subsidised by the government.

SIAM's car sales forecast for the year to March 2013 was down slightly from its April projection of 10 to 12 per cent annual growth, which the industry body blamed on a sharply slowing economy.

SIAM said its new annual forecast was "reasonable" -- even though car sales climbed by just 5.2 per cent in the financial quarter that ended in June, well below the projected annual growth.

"We're optimistic as interest rates are stable and we hope they'll come down," SIAM president S. Sandilya said, adding the government was under "tremendous pressure" to bolster the economy.

SIAM also said heavy price discounting and the roll-out of new models would support its annual forecast.

The nine-to-11 percent sales projection is still far higher than last year's performance when sales growth slowed to 2.2 percent as the sector was hit by aggressive rate hikes to control inflation and manufacturing supply problems.

While Western carmakers would envy the Indian car sector's projected sales, they were disappointing for India, SIAM added.

"This forecast would be an occasion to break out the champagne in Europe -- but plus-20 per cent annual growth is the norm for India in good times," SIAM director-general Mathur told AFP.

"Considering the huge potential of India's market, this projection is not very bullish at all," he said, noting just 10 or 11 people per 1,000 in India own cars compared with over 500 per 1,000 in the United States.

While hundreds of millions still live in abject poverty in India, previous years of breakneck economic growth have minted millions of new middle-class families who have been trading up to cars from two-wheelers.