Government today 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 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. 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. Indian's GDP grew at 7 per cent in the first quarter of current fiscal and government expects it to grow 8-8.5 per cent 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, Sinha said after factoring in the cost of hedging dollar against rupee, large companies are able to borrow at reasonable rates. "The financial markets in India work well for a certain group of players. And I think largely for large players in India, the markets are working relatively well. Risk is being priced appropriately," Sinha added. He further said that bluechip companies in India borrow at around 5-5.5 per cent over a 30 year horizon in global markets, whereas in rupee terms the cost of borrowing would be 10-12 per cent. "If you look at large companies in India they are able to borrow at fairly reasonable rates once you factor in the cost of hedging dollar against rupee," he said. As regards funding stressed infrastructure projects, Sinha said the National Investment and Infrastructure Fund (NIIF) would act as a special situation fund anchored by the government and could include other investors like pension funds.