Investment Methods


How to invest your hard-earned money is a very crucial decision. Financial markets are very complex. There are many options which are confusing people about the best places to put their hard earned money. To decide which investment options are best, you need to know their features and why they are relevant for a particular investment objective.

The following key terms can help you understand the investment process and enable you to make financially sound decisions:

Stock: Stocks are also known as equities or shares. When you buy a company’s stock, you become a part owner of the company. And, if the company performs well, your stock will also do well and gain profits. You can also buy and sell the stocks whenever you want. The advantage of investing in stocks is that all the invested money is liquid and you can easily exit the market, if your stocks are doing well by booking profits.

Bond: They are certificates of debt. By purchasing bonds or debts an investor becomes a creditor to the government or the company for a pre-set interest rate paid regularly for a defined period. On maturity, total face value of the bond is paid to the investor. The main benefit of buying bonds is that you have a higher claim on assets than shareholders. Also, you know the exact amount, you will be getting when you purchase a bond. The major disadvantage of owing bonds is its illiquidity. Your money is locked for a particular period of time.

Mutual fund: It is a mixture of bonds and stocks. Buying them is like pooling money with other investors, and hiring a professional manager to invest in particular securities on behalf the pooled investors like you. The main benefit of a mutual fund is that you can invest your money without any expertise and time.

Exchange-traded fund (ETF): ETFs is referred as a portfolio of securities that trade like stocks. Investing in an ETF is more like purchasing shares of the total fund rather than shares of individual companies.

Money market account: It is a kind of savings account that gives a competitive interest rate in exchange for huge deposits.

So, you now know about the most common investment options. However, there are many other options, which represent the most complicated types investing strategies. By taking the time to know about the types of investments and the strategies that complements them, you can become a savvier investor.

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Wealth Management Sector

wealth_management-4Despite the growth in the recent past, the international wealth management sector is involved in various challenges. Wealth management organizations must transform their business operations to negate the challenges and make the most of the opportunities.

The international wealth management sector has expanded greatly over the recent past and is looking at more growth in the coming years.

The main reason for the growth is an increase in the number of HNI’s globally. However, it has to overcome key issues – client technology transference, emerging revenue stream to maintain the growth trajectory.

Firms must have a comprehensive client segmentation and valuation plan to succeed. The client onboarding process is also outdated and looked upon as a cost factor.

WM institutions don’t have the financial plan to offer a wide array of services to the client in a unified manner. They must augment their business model, revamp their strategy.

A Relationship Manager becomes a vital point of contact for the client. The Relationship Manager must be supported by product experts. Integrating the service models would be the key to success.

Mega WM organizations must streamline their multidimensional ventures providing lending, consumer banking and other services along with the wealth management service. There is a shift in the demographic pattern across nations.

Firms must ensure their business model is in line with the international investment requirements of the clients and make use of the business opportunities due to increase in retirement requirements and transforming demographics.

Firms must have a client centric method to ensure they provide a distinct client experience. They must deliver an amalgamated approach to the client and ensure they are able to view all the assets that are not available in the firm through a web front end.

Modified MIFID, US Dodd-Frank Act, UCITS IV, Basel III, FATCA are few of the regulations governing the Wealth Management sector. Therefore, firms must look at enhancing the effectiveness of the compliance programs and emphasize compliance requirements.

They must use, powerful data management and reporting tools. Streamlining processes and ensuring operations perform at optimal levels is a key.

Monitoring key metrics is vital in enhancing the process efficiency. If WM organizations do not manage the client onboarding process properly, they would miss on the asset growth opportunities.

At present, firms are not able to accomplish the clients’ requirement of immediate access to their account information through the mobile devices.

Leveraging a business process management solution would enable firms to manage risk, reduce cost, and efficiently handle client relationship.

Utilizing BI solutions would assist the WM institutions holistically. Firms must be cautious while investing in technology and outsourcing the non-core businesses.

The Global Wealth Management sector must follow powerful strategies to enhance its brand equity. They must adopt a holistic approach towards key challenges and the accompanying opportunities.

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Targeted Marketing for Banks

ey-web-target-marketingSince retail banks have understood the benefits of a targeted marketing method, the normal marketing technique is not in favor. Banks would be able to segment consumers into groups based on the demographic and consumer behavior, by following a targeted marketing approach.

Creating a positive customer experience in the extremely competitive retail banking environment is a significant challenge for the retail banks. Guided by the enhancement in the availability of multiple communication devices & technologies, customer expectations have undergone a transformation.

Banks have to offer personalized products to stay in business. The basic assumption with regard to predictive analysis is very simple, predictive analytics can furnish the banks useful insights into the regularly transforming consumer behavior and requirements throughout the consumer life cycle.

Banks usually follow the normal marketing technique of having marketing campaigns year-on-year. The marketing strategy is based on in-house measures instead of consumer preferences. Targeted marketing campaigns emphasize consumer requirements that result in an effective reply rate.

The utilization of predictive analytics requires banks to finalize critical data points to ensure successful marketing:

Communicating with Customers

Predictive analytics can assist in identifying the high-value customers to be targeted. This reduces the no of customers to be communicated, thereby ensuring significant cost reduction while enhancing the reply rates.

Channel Management

 Predictive analytics can enable a bank to identify the best channel to communicate with a targeted customer. This would to a large extent enhance the response rate. Therefore, predictive analysis enables banks to maximize the marketing campaigns across the channels. The focus on communicating with the client through a preferred channel could assist in enhancing the customer loyalty.

Personalized Offering

 Providing customers with unwanted offerings could result in alienation. Under these circumstances, predictive analytics would perform a vital role. The technology would enable the customer to evaluate all existing products delivered by a bank and select one that matches the customer’s choice. The method would be useful in initiating a need-based selling.

Offer Timing

The timing of a marketing offer is critical. Predictive analytics can assist in monitoring consumer databases to identify critical life outcomes, thereby ensuring delivery of the perfect offer at the appropriate time.

Leveraging Predictive Analytics across the Consumer Life cycle

Leveraging predictive analytics can assist a bank in providing the most optimal offer at an appropriate time. The basic crux of predictive analytics is in comprehending the relationships between previously detailed customer actions and non-detailed actions which can be used to forecast the probable actions.

Customer Validation

In the recent past, there has been a significant requirement for retail banks to manage certain issues such as cementing relationships with high-value clients. Therefore, banks have spent on analytics tools.

The advanced analytical apps enable banks to validate the clients based on key information – credit worthiness, loan portfolio among others. The customers spending pattern can also be monitored to determine the customer’s loan repayment capability. All debtors can be forced to make the payment.

Customer Retention

It ensures lesser customer attrition. Banks can monitor a customer’s previous record to ascertain the possibility of the customer moving to another bank. Leveraging predictive analytics would assist the banks in interfacing with HNIs and develop customized marketing plans to retain their accounts.

Banks continue to face several obstacles. The main objectives of banks are to transform prospects into clients, manage relationships with HNIs and enhance revenue. The use of predictive analytics in marketing would assist in providing specific offers, thereby boosting sales.

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Risk Assessment and Decision Making in Banking

risk-assessment-clipart-1The key business of a bank is to efficiently manage risk and ensure exceptional ROI to shareholders as per the acknowledged risk profile. The credit crisis and the following recession have impacted the core business of global banks.

According to the consultancy firm A.T. Kearney, “The framework for risk management in a bank is fundamentally no different than it was prior to the credit crunch and recession. Indeed, the risk function lacks certain business acumen, and continues to be considered a hand-brake on growth”.

Some of the key tenets in managing risk are as follows

Establish a System to Classify Risk

Every activity in a bank has its own characteristics that provide value in a specific environment. If they are removed from their environment, they could be misunderstood. Therefore, risk stakeholders in a bank must convert risk issues into a medium that is easy to comprehend.

Create a Holistic View on Risk Exposure

Risk experts must emphasize the critical risks because not all risks are created or are equal. Banks must manage credit, market and operational risks efficiently.

Bank experts leverage tools such VaR (Value at Risk), Monte Carlo simulations, CFaR (Cash Flow at Risk), stress testing among others to determine the risk proportion.

Under any given circumstances, distinct risks could be more pertaining in comparison to others, but the bank must understand its risk framework and track them. Hence, banks must establish discreet and effective risk management practices.

Centralized Process Management and Decentralized Decision Makin

Risk management is efficient if it is enforced regularly covering the banking operations with procedures that have been created by risk stakeholders.

Bank personnel must use the tools and processes to create a positive customer experience. Customer queries must be replied expeditiously.

According to experts, banks that adopted a decentralized business model were hampered by a lack of transparency in business practices. Hence, they could not manage the risks and fail.

However, centralizing critical processes with respect to risk, while facilitating a decentralized approach to decision making provides security against insignificant risk.

Role of Leadership

The senior leadership in a bank must drive the process while interpreting the roles and responsibilities throughout the organizational hierarchy to control risk profiles.

The leadership team must not only define the vision but also function in line with the organization’s vision.

Quantify Risk Vulnerability and Cost/Benefit Analysis of Managing Risk

The risk of credit derivatives must be quantified to ensure an effective risk management. In-depth risk assessment on a regular basis and quantification of the net benefits of properly handling the risk is mandatory to avoid any financial crisis.

Top Notch IT Infrastructure to Manage Risk

The banking sector is increasingly leveraging top-notch IT systems to manage complex banking operations and negate risk. It is imperative that the IT systems are developed based on the requirements of the end user.

A robust IT infrastructure (control and compliance assessing technology, databases and research/communication tools) could support an organization in effective risk management.

They are vital to ensure the delivery of concerned information for decision making by senior management.

An Organizational Transformation

For a bank to be effective in managing risk, an organizational transformation with an emphasis on a cultural change in risk management is essential.

Again, the establishment of systems and programs would create the environment for efficient organizational transformation.

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Relationship Based Pricing in Financial Services


According to experts, clinching a new account is more expensive than retaining an existing account. However, in a competitive market, post the financial crisis in 2008, financial firms are finding it tough to even retain existing accounts.

Financial institutions with an ability to understand a consumer behaviour/analyse data, utilize the inputs to facilitate a relationship based pricing strategy that would secure optimal results in terms of enhanced revenues and better margins.

They have faced growth issues in the recent past. Several organizations have devised customer retention strategies. In a highly competitive business environment, losing a customer would result in the loss of revenue.

The effectiveness of an organization’s client relationship would be the base for the firm’s business planning. Firms find it difficult to have an optimal approach in enhancing the client relationship. It could assist in augmenting the cross-selling opportunities and increase the asset performance while improving the brand equity for the firm.

The theory of relationship based pricing helps in overcoming the issues. It focuses on the lifeline of an organization – customers. It looks at options to influence their decisions and establish a long-term relationship for the business growth.

The key factors for the success of a Relationship Based Pricing Method are as follows:

Consolidated Processes

If the relationship based pricing concept has to succeed, existing systems encompassing various channels – website, mobile, social media must take a comprehensive organization-wide approach covering various asset types. Having a centralized approach to billing and pricing will standardize billing/pricing process with regard to various products and business verticals.

Customer Segmentation

An effective customer segmentation is a foundation for a financial institution to spearhead relationship-based pricing. The first step is to analyze customers’ previous behaviour, leverage modelling techniques to forecast outcomes. After an organization has finished segmentation, it could strategize its relationship. Amalgamated systems can encourage a distinct perspective of customers.

Leveraging efficient customer analytics along with enhancing the systems to collect data would enable financial institutions to establish a relationship with profitable customers. Analyzing mega data would enable firms to comprehend a customer’s behaviour and develop products/services that are priced in line with the customers’ expectations.

The process of segmenting customers on the basis of lifetime value (LTV) is becoming very prominent. The capability to determine the benefits from a client would enable firms to focus on profitable customers as per the firm’s long-term business plan.

Cluster the Product Offerings

Financial institutions with complementary products must bundle them together and offer as a package, thereby accomplishing a business synergy. The benefits of a lesser consolidated price for the services would be passed on to the customer. The organization can reduce the costs of service delivery along with maximizing the cross-selling opportunities.

Change Management

An organizational transformation is critical for a relationship based pricing. Facilitating the change encompassing systems, people, processes and customers is a complex process. Stakeholders across the organizational hierarchy must interface with each other. Effective internal communication is the key for the process to succeed.

Relationship-based pricing assists financial institutions to transform from a product centric to a customer centric pricing policy. It supports in removing issues pertaining to customer retention and revenue loss. The RBP methodology delivers a comprehensive perspective of a customer relationship and ensures an emphasized sales method to existing customers.

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New Rules for Tax Havens


A group of 300 Economists has asked for new international rules that would force firms to disclose taxable functions across the globe.

In a letter addressed to global leaders, the Economists requested the UK to lead the drive for greater tax transparency. They stated, developing nations are the main losers from tax havens.

The letter came before the UK government’s anti-fraud summit on 12th May 2016, which political leaders from 40 nations in addition to the delegates from the World Bank and the IMF had attended.

The economists felt the UK’s stand as the summit organizer along with its control over a third of the global tax havens makes it “perfectly placed” to take the leadership role.

Modified international agreements on concerns like public nation-by-nation reporting, which includes for tax havens were required at the earliest.

The governments were urged to set their houses in order by making sure all the regions that are under their control make openly accessible information pertaining to the actual beneficial holders of firms and trusts.

The measures sought were in response to the Panama Papers leak, which exposed the way affluent individuals across the globe hide assets. The leak generated extensive outrage that the regulatory agencies had not acted appropriately.

According to a signatory, the economist Dr Ha-Joon Chang of the University of Cambridge, “the tax havens serve no useful purpose. These tax havens basically allow companies and certain individuals to free-ride on the rest of humanity.”

The firms use the services of the workforce and the public infrastructure in a distinct nation and transfer the money to another nation through a shell firm which does not have any business operations there.

As per Professor Jeffrey Sachs of Columbia University, “tax havens showed how the rich and the powerful really control the levers of finance. Even with the secrecy, we’re in a more transparent world so I think our governments are being pushed harder and harder to crackdown on these abuses.”

The economists believed if tax havens controlled by the developed nations aid the wealthy escape from paying tax, it would continue to impact the credibility of global leaders in the battle against corruption and international poverty.

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Futureproofing The Retail Sector

images-1Future-proofing is the procedure of forecasting the future and establishing methods of reducing the effects of breakdowns of future proceedings.

Some of the principles of future-proofing are:

  • Prevent deterioration of materials.
  • Foster flexibility.
  • Prolong the service lifespan.
  • Secure against materials shortages.
  • Enhance endurance.

Advanced technologies are rapidly transforming the retail sector. Retail firms must respond expeditiously to altering pressures and competitive market dynamics while sustaining a sharp emphasis on business results: revenue, sales, and customer interaction. In other words, adaptation would be the key to staying in business.

Some of the salient features that retailers must adapt in the coming years to future proof their business are:

Shift to Omni-channel

The global retail sector is witnessing a period of low-growth while technology is reducing entry barriers for new ventures and business models.

This has increased the competition in the sector. The mobile computing revolution is forever modifying the retail environment. This is a method to better comprehend and address the shifting competitive scenario with a comprehensive Omni-channel retail strategy.

Regular Changes in Prices

Price changes in the retail sector have been rising exponentially in recent times. Retailers have substantially increased the amount of price movements. Retailers must reassess their pricing strategy.

Value Is More Than the Price

According to Ken Murthy, president of Global Brands, Walgreens Boots Alliance (USA), “Retailers can no longer afford to insult customers on price.”

Disregarding market transformations and letting the customers migrate to the competitors is not a business choice, but neither is permitting the competitors to influence the pricing strategy.

Retail firms without a sound price matching policy have witnessed their business margins being impacted.

Retailers must adhere to a reactive merchandising plan. In order to stay relevant in the Omni-channel domain and implement price changes quickly, they would have to incorporate the state-of-the-art technologies that would provide them with an advantage in terms of speed, scale, and efficiency.

Currently, retailers in the developed economies such as the US and the UK are witnessing positive business outcomes by implementing the price optimization technology.

If they cannot convert consumer and competitive information into feasible business insights that verify their pricing strategies, they would not be able to compete in the marketplace.

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CSR in Financial Services


Corporate Social Responsibility is being recognized by the decision makers in the financial institutions.

Financial institutions have realized that anything that benefits society would enhance revenue for the financial institutions. An organization’s CSR policy must be viable like its business model.

They must spearhead socioeconomic transformations and product innovation strategies to ensure environmental sustainability.

Banks are increasingly becoming environmentally sensitive. They are using paperless statements, electronic payments while installing carbon neutral buildings to reduce emissions and cut costs.

Thereby, the financial institutions are driving the change to a low-carbon business growth. FIs collaborate with NGOs to fund the education of children from the lower income groups.

They also deliver vocational training, encourage sports/educational events, exhibitions, natural disasters relief events among others.

Global financial institutions are looking at the connection between profit and social growth in emerging nations.

They are ushering in economic development through microfinance initiatives. Banks perform healthcare programs in partnership with the NGOs.

Financial Institutions function in an effective business climate. Therefore, FIs have to overcome obstacles to ensure CSR is viable.

Absence of a Framework

 Financial institutions initiate CSR functions in the absence of a framework for benchmarking CSR. The real value of CSR is difficult to quantify since best practices don’t exist.


Financial institutions have to function in a very competitive environment. Any effort to fund CSR initiatives is constrained by limited budgets and the bottom line.

Regulatory Compliance

Complex regulations require significant expenditure with regard to regulatory compliance. FIs must collaborate with the government to revamp regulation via governing bodies.

Customer Service

 Customers are looking for viable products and services. Financial institutions must establish a positive market scenario and a feasible business environment.

FIs must constantly look for opportunities for new products/services through CSR activities. They have to fund a low-carbon infrastructure and green economies.


The lack of business stability is forcing financial institutions to downsize, CSR may not be able to stop downsizing, but it can be done in a positive manner.

Metrics Measurement

CSR metrics like energy usage, water consumption, CO2 emission denote a firm’s environment- friendly initiatives.

Human Resources

Feasible CSR initiatives need an in-depth insight on factors influencing decision-making with regard to CSR.

Government Policies

Financial institutions must understand government policies effectively to resolve issues related to viable CSR.

Business Environment

Connecting the dollar value and brand equity of an organization could be a complex process.

CSR has resulted in tremendous benefits for society – community welfare, economic growth, and environment security.

Some of the benefits of CSR:

 Improves Brand Equity.

  • Cements long-standing business relationship.
  • Enhances financial results.
  • Increases business development.

The driving force behind a viable CSR

Internal Audit

Financial Institutions must review their portfolio and do a detailed audit of the economic and environmental outcome of business performance in retail/commercial banking, asset management, investment/private banking.

The 3Ps

Products, processes and people are key features of any CSR initiative. Solutions must be personalized for distinct components.


Top-notch innovation is vital for viable CSR initiatives. It would lead to the development of new products/processing techniques.

CSR Strategy

A comprehensive CSR strategy is vital for a viable CSR. All CSR functions must be reported. The details of a CSR activity such as investments, tangible/intangible outcomes must be informed to stakeholders.

Financial Institutions realize that CSR is an internal aspect of a viable business. CSR must be installed across the business life cycle to facilitate the long-term business growth.

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Biometrics in Banking


The banking sector is increasingly using the electronic medium for performing business transactions. Banks store customer/financial data, product information in the form of an electronic document.

Therefore, information security is vital for the continuation of business operations and to protect the overall brand image of the bank.

A biometric security system facilitates a safe and approved access to vital data stored in electronic documents. It is mandatory for banks to establish a strict user and security protocol.

Documents, pictures, and videos can be described as confidential information. The information can be managed by either an individual or an organization.

Only authorized individuals are granted access to such an information. Though organizations have security protocols to safeguard information, they don’t always guarantee information security.

Security Clearance

It is given to personnel categorized under various levels of confidentiality. Other than security clearance, organizations must decide if the individual must know the information. Therefore, access to sensitive information should be on a “need to know basis”.

Traditional Security Methods

They consist of knowledge-based identification systems for document safety. Some of the features are:


The concerned individuals create a distinct personal identification number (PIN) or password to retrieve the information in the document.


The information is encrypted before it is passed through the network, thereby safeguarding information from a security breach. The person receiving the information must decrypt the information before accessing it.

In traditional security methods, the infrastructure is minimal and it is cost effective. However, the risks are more than the positives.

Biometrics Security

It consists of the identification of human beings through their distinct attributes. The biometric data can be used for a security clearance because it remains the same throughout the life of the individual. It includes fingerprints, eyes, DNA, speech, and facial features.

Biometric security is based on a pattern identifying system that recognizes an individual by determining the credibility of distinct physical/behavioural characteristics of a user.

The main criteria of biometrics security are distinctiveness. The system manages data to validate personal information.

It interfaces biometric data systems and biometric recognition technologies. A person can gain entry to the biometric security system by delivering their distinct features that are matched to a database. The locking system furnishes access only if the information is correct.

A biometric system functions based on the following:

The extraction component interprets biometric data. The result of the model is a series of extracted features that are in sync with the matching algorithm. The model would assess the efficiency of biometric data.

Biometric templates are kept in a database. They can also be placed in the system since it doesn’t modify an individual’s iris. The scanner interprets the outer iris and moves internally. It plots various markings and maps the features identifying the distinct colour of the iris on the basis of markings.

The data are placed in a database for validation in the future. The biometric matching algorithm matches existing biometric features with the captured template.

The prearranged security threshold level could be a factor in the matching process. The outcome could either be a reject/accept directive. In the absence of a match, a quantified outcome that correlates the template and the existing biometric sample is created, which facilitates decision making.

Banks must safeguard sensitive data. Biometric technology delivers improved security while being user-friendly. It ensures the information is processed by authorized individuals. It decreases malpractices and reduces the password administration costs.

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The Green Initiative by The Automobile Sector

The trend of “Going Green” is gaining significance recently across sectors. Investors are concerned about the day-to-day operations of firms. Corporate Social Responsibility is increasingly becoming relevant.

The advancement in modern society has made people realize that resources are not perennial. Companies are under scrutiny for their operational efficiency. Profits are not the only benchmark for evaluating an organization’s success.

According to research by Economist Ron Robins, “The majority of executives believed Corporate Social Responsibility (CSR) could improve profits and the last thing they would do was avoid engaging in CSR”.

The automotive sector has been under the scanner for its negative impact on the environment and its contribution to global warming. On the other hand, the automotive sector contributes two to three% of national GDP in many nations. There is a connect between fuel efficiency of the automobiles and CO2 emissions.

Automotive manufacturers are facing increasing risk due to a rise in oil prices and the regulations pertaining to C02 emissions. Developed economies, including the EU, Japan, and the US have established policies to check CO2 emissions.

Other than the CO2 emissions, the complete supply chain process of automobiles has a negative impact on the environment.

Many automobile manufacturers have launched green operation initiatives with an emphasis on utilizing green supply chain management methods that can be a solution to the CSR issues affecting the automotive sector.

They have implemented several green operations practices – green buildings, eco-design, green supply chains, green manufacturing, reverse logistics, and an innovation of alternative fuel solution for cars among others.

As per IBIS World (International business intelligence organization), “increasing gasoline prices and consumers’ awareness of environmental issues has reshaped consumers’ preferences from fuel-guzzling pickup trucks to smaller, more fuel-efficient cars”.

Some automobile manufacturers such as Toyota shifted to hybrid and fuel-efficient production, thereby witnessing a boost in sales.

The skyrocketing fuel prices, government regulations of CO2 emissions and CSR initiatives of automobile manufacturers drove the sales of hybrid electric vehicles which are cost effective in terms of fuel consumption and lesser CO2 emissions while comparing with standard vehicles.

Several governments have not only checked CO2 emissions, but also established policies – tax reduction, low-interest rate financing, and cash rebates to encourage the use of fuel-efficient automobiles.

The transformation in the consumers’ preference along with the government incentives for fuel economy solutions made the automobile manufacturers invest in R&D to accomplish the objective of better fuel efficiency and decreased greenhouse gas emissions. Hybrid electric vehicle (HEV) technology is becoming popular in many nations.

As per findings by international agencies, “Global energy consumption is likely to rise by 53% between 2006 and 2030, and about three-quarters of the projected increase in oil demand is likely to come from the transport sector”.

The governments are encouraging the development of alternative propulsion systems.

Technology combined with a response from the industry, policies, customer preference and investment opportunities would facilitate the growth in “Green Manufacturing” which looks at the environmental aspect and resource utilization across the product lifecycle – design, fabrication, packaging, and transportation to waste disposal.

According to experts, a wide range of green vehicle technologies together could improve fuel economy by 30 to 55% during the next decade.

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