Government on Thursday favoured an increase in pension fund EPFO's equity market investment to 15 per cent, from 5 per cent currently, saying it will help contain volatility in the domestic capital markets.
“We are now saying Employees Provident Fund Organisation (EPFO) which always had the ability to put up to 15 per cent of its assets in equity markets but never did so, has to now do at least 5 per cent. And hopefully over a period of time they bring it up to 15 per cent,” Sinha said at the India Economic Convention.
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.
Sinha said that the BJP-led NDA Government is focusing on building productive capacity to sustain 8-10 per cent growth over a longer period of time. “We want to build in India's productive capacity so that we can sustain 8-10 per cent non-inflationary GDP growth rate not just for few year, but to be able to achieve that 8-10 per cent growth steadily through boom and bust cycles,”he said.