Deflation continued

Continuing the deflation post from yesterday, there is a big difference between consumer price inflation and wholesale price inflation right now in India. CPI is running in high single digits, while WPI is close to 0. This implies firms are increasing margins - which is what FMCG analysts are factoring in their EPS growth projections. I don't think this can last long. In each FMCG category, there will be an upstart who will try to use price cuts to expand market share, which will force the biggies to react. Lets see.