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I have acquired a new domain. So, you will be able to read this article by clicking on the following link: http://monishborah.com/2016/11/09/why-did-the-government-take-out-indias-big-rupee-banknotes/
Will the food prices increase due to demonetization?
Well, supply has not been hit but people’s purchasing power has been negatively hit due to capital controls following demonetization. So, there should be more goods in the market than people can buy, so it should lead to deflation or decrease in food prices rather than inflation. Since everyone in the market also knows this, speculators will also be hedging their bets on lower food prices which should drive the prices even lower.
But, if the government is not able to inject the rural sector with sufficient cash quickly- the farmers will not have enough money to buy seeds, fertilizers or excess labour for the upcoming rabi season which might increase the price of food in 4-6 months time.