Auto trade body lowers FY 2017 growth target on higher taxes

NEW DELHI (Reuters) - India's auto trade body has lowered the growth estimate for passenger vehicle sales in the next fiscal year to 11 percent from an earlier forecast of 12 percent, after the government raised taxes on car sales last month.

In his annual federal budget, Finance Minister Arun Jaitley imposed a sales levy of up to 4 percent on new passenger vehicles aimed at helping fight air pollution and congestion, and a 1 percent luxury tax on cars priced higher than 1 million rupees ($14,916).

The higher taxes will be a dampener for passenger vehicle sales and there may be a retardation in growth, Sugato Sen, deputy director general at Society of Indian Automobile Manufacturers (SIAM), told reporters on Thursday.

Sales growth could further fall to 9 percent if the monsoon rains are poor as that would hurt incomes and sentiment in rural areas, Sen added. Farmers depend heavily on monsoon rains to irrigate their land.

SIAM earlier estimated sales of passenger cars and utility vehicles to grow by as much as 12 percent in the fiscal year starting April 1, higher than the 8 percent growth estimated for the current year.

In February, passenger car sales fell 4.2 percent, the second consecutive monthly decline, lowering the overall growth outlook for the year to end-March.

($1 = 67.0400 rupees)

(Reporting by Aditi Shah; Editing by Sunil Nair)