INDIA AND China saw declines in car sales in October after authorities in both countries raised borrowing costs to curb inflation.

India’s car sales suffered their biggest fall in more than a decade, the strongest indication yet that the country is heading for an abrupt slowdown.

Meanwhile, sales in China fell for the first time in five months. The China Association of Automobile Manufacturers said that deliveries fell 1.1 per cent to 1.52 million in October, led by an 18 per cent drop in minivan sales.

In India, the Society of Indian Automobile Manufacturers said car sales fell 23.8 per cent, the biggest drop since December 2000, when they fell 35 per cent.

Indian policymakers are increasingly concerned over the health of the economy, as the ballooning fiscal deficit, slowing exports and high interest rates have damped investor sentiment over the past month. Moody’s, the rating agency, downgraded India’s banking system to negative, citing worries that the global economic turmoil and a domestic slowdown might trigger more defaults and curb profitability.

Meanwhile, in China the drop in commercial vehicle sales was offset by continuing strength in car sales, which were up 6 per cent in the first 10 months. The overall decline was from an unnaturally high base last October.

“We had two tremendous years of growth and that has blurred our view of reality,” said Klaus Paur of Synovate, a Shanghai auto consultancy.

Chinese vehicle sales grew 32 per cent last year and 46 per cent the year before. “The reality is we still have a growing market, just at a higher level.”

Most analysts say underlying demand for passenger vehicles in China remains strong.

– (Copyright The Financial Times Limited 2011)