The Union finance ministry's plans to notify an interim investment pattern under the New Pension System to facilitate the parking of 5 per cent of the pension funds in the stock market would have a positive impact on the economy, according to V Rajendran, managing director of Thiruvananthapuram-based Capstocks and Securities (India).

Welcoming the move, the Capstocks MD said the move would prove beneficial for the bourses in the long term, and will aid the economy to ensure a steady flow of funds into the stock markets.

He added that the current 5 per cent may also be increased over the coming years when the bourses feel the positive impact due to this.

The funds collected from new Central government recruits under the NPS, since January 2004, is to the tune of only around Rs 1,500 crore (Rs 15 billion), and hence has had no major impact.

However, the combined pension bill of the Centre and the states would touch a level of Rs 1,00,000 crore (Rs 1,000 billion by 2009-10, according to the finance ministry estimates, he pointed out.

"If a higher percentage is permitted, the amount will rise and that would mean substantial money," he added.

This, according to him, would mean that, within a few years, a substantial amount would be available from the pension funds for investment in stock markets.