* Sales rise 26 pct in Aug; festive demand seen helping

* Trucks sales up for 2nd month after falling since July 08 (Adds detail)

Car sales in India raced an annual 26 percent in August, rising for a seventh month, and demand is seen picking up in October when annual bonuses are paid in much of the country.

The government is also set to give out 180 billion rupees ($3.7 billion) in backpay to workers next month, the second instalment of a wage pact agreed last year.

Industry body the Society of Indian Automobile Manufacturers (SIAM) said on Tuesday companies sold 120,669 cars in August against 96,082 in the same month last year.

Sales in the first five months of the fiscal year that began in April have risen 13 percent, with the pace of growth in July the fastest at an annual 31 percent, after rising just 1.3 percent in the year to March 2009.

Some further growth is anticipated. Definitely some build up is happening for the festive season. The last instalment of the sixth pay commission is also expected to boost demand, Sugato Sen, a senior director at SIAM said.

He said SIAM, which had projected in April full-year sales growth at 5 percent in 2009/10, would revise upwards its forecast after September sales are known.

Car sales are a leading gauge of consumer sentiment in India, in the absence of other indices and the country is one of the few markets in the world where demand has been picking up though volumes are much lower than in China.

China's passenger cars sales in August rose 90 percent from a year earlier to 858,300, the China Association of Automobile Manufacturers said on Tuesday. [ID:nBJD003014]

In India, Maruti Suzuki (MRTI.BO), a unit of Japan's Suzuki Motor Corp (7269.T), led the growth posting an annual 42 percent jump in August sales at 84,808 units.

The company, which produces every second car sold in India, is building a new factory to upgrade its production facilities to meet demand.

Maruti shares have risen nearly 200 percent so far this year and hit a record high on Monday.

TRUCKS ALSO ON THE RISE

Sales of trucks and buses, a barometer of economic activity, rose 18.5 percent from a year earlier to 40,624 units, their second straight rise after falling continuously since July last year.

Sen said a rise in the sales of medium and heavy commercial vehicles was a healthy sign and indicated economic activities were picking up.

Motorcycle sales rose 26 percent to 611,173 units from a year ago. (Editing by Ranjit Gangadharan)

India China