"We are now saying Employees Provident Fund Organisation (EPFO), which always had the ability to put up to 15 percent of its assets in equity markets but never did so, has to now do at least 5 percent. And hopefully over a period of time they bring it up to 15 percent," Minister of State for Finance Jayant Sinha said at the India Economic Convention here.

He said pension funds investing in domestic equity markets would help lower volatility in equity markets and as that comes down the cost of capital on equity side for businesses would come down. "We are trying to ensure that we stabilise and smoothen out our equity market," Sinha added.

The EPFO, which started investing in equity markets last month, has been investing primarily in state and central government securities. The Minister said that the BJP-led NDA government is focusing on building productive capacity to sustain 8-10 percent growth over a longer period of time.

"We want to build in India's productive capacity so that we can sustain 8-10 percent non-inflationary GDP growth rate not just for few year, but to be able to achieve that 8-10 percent growth steadily through boom and bust cycles," he said. Indian's GDP grew at 7 percent in the first quarter of current fiscal and government expects it to grow 8-8.5 percent this year.

Sinha said the macro economic indicators, inflation, GDP growth, current account deficit and fiscal deficit, have improved considerably since May 2014, when the BJP government came into power. As regards cost of capital, Jayant Sinha said after factoring in the cost of hedging dollar against rupee, large companies are able to borrow at reasonable rates.

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