Increases in the cost of petrol in India recently could accelerate the adoption of diesel-powered vehicles in the country.

An industry analyst told Reuters that the cabinet's 9.2 per cent increase in petrol rates would not stop people using their cars, but could encourage a switch to diesel.

"Oil demand is inelastic and there is not much scope for a fall in consumption as the price increase is not that steep," said D H Pai Panandikar, economist with the corporate think tank RPG Foundation.

"But it may make diesel cars an option," he added.

Government figures suggest that the sale of diesel grew by 1.3 per cent during the last financial year, faster than overall oil sales.

India is now Asia's third largest economy with a growth rate of eight per cent, which could help increase demand for vehicles is the country's middle class expands.

A total of 1.11 million new cars were sold in India last year, which was a seven per cent incresase on the year before, Reuters said.

Ÿ Adfero Ltd