Passenger vehicle sales seen up 6-8 percent in fiscal 2016

NEW DELHI (Reuters) - Faster growth and improved consumer sentiment should boost sales of passenger cars and utility vehicles in India by 6 to 8 percent in the year starting in April, the country's auto industry body said on Tuesday.

The improved sales outlook for utility vehicles, cars, buses and trucks comes against the backdrop of the government's annual budget proposal to raise investment in infrastructure, including roads and railways.

"Lot of investment is expected to go into infrastructure and in rural areas, and once the money flows there will be a revival," Sugato Sen, deputy director general of the Society of Indian Automobile Manufacturers (SIAM), told reporters.

Growth in passenger vehicles sales in India in the current fiscal year ending March 31, is expected to be in the low, single-digits after two years of declines, according to SIAM.

Passenger vehicle sales in the first 11 months of the year to end-March rose 4 percent to 2.36 million.

The Reserve Bank of India also announced a surprise interest rate cut last week, the second such cut this year, which is likely to push sales further in a market where a large number of vehicle buyers rely on bank loans.

"We need a kick start of the economy and that is what has come out in the budget," said Sen, adding that the government's decision to increase its contribution to rural welfare schemes will drive demand for motorcycles and entry-level cars.

Motorcycle sales are expected to rise by 6 to 7 percent next fiscal year, while scooter sales are likely to rise by a fifth, SIAM said, adding that the estimates were arrived at jointly with several rating agencies, including Crisil.

(Reporting by Aditi Shah; Editing by Sumeet Chatterjee and David Clarke)