Hybridization with engine downsizing is a regular trend to achieve fuel economy benefits. However this leads to a development of new downsized engine which is very costly and time consuming process, also engine downsizing demands for expensive higher power electric system to meet performance targets. Various techniques like gear ratio optimization, reducing number of gears, battery size and control functionalities optimization have been evaluated for maximum fuel economy keeping system cost very low and improving vehicle performance. With optimized gear ratios and reduced number of gears for parallel hybrid, it is possible to operate the engine in the best efficiency zones without downsizing. Motor is selected based on power to weight ratio, gradient requirements, improved acceleration performance and top speed requirement of vehicle in EV mode. Control strategy has been optimized to get maximum fuel economy benefits in both city and highway drive conditions by optimizing torque split between engine and electric motor. Simulation results show that there is 25% to 50 % performance improvement over conventional vehicle in overall vehicle operating speed ranges. Also fuel economy benefits of 40% to 60 % in city conditions and 20% to 25 % improvement in combined city and highway conditions can be achieved. Optimized transmission and control strategy hold a key to significant enhancement in fuel economy and performance of a parallel Hybrid electric vehicle without downsizing engine. Thus it seems that full HEV without engine downsizing can achieve desired fuel economy and performance at low cost and with comparatively less effort.