Today's oil crisis vs 1973 embargo, AI in education, Semicon investments | Bidishanomics Ep 26

Summary

In this episode of Bidishanomics, economics editor Dr. Bidisha Bhattacharya answers viewers’ questions about the oil supply shock, AI in schools, technology-led investment booms, and infrastructure delivery.

Oil shock: greater supply disruption, less severe economic impact—for now

Bhattacharya says the current disruption is physically larger than the 1973 embargo: the volume of oil supply offline reportedly exceeds the losses from 1973, 1979, and the 2022 Russia–Ukraine conflict combined. But the economic impact has so far been less severe than in 1973, when oil prices quadrupled. Today’s price rise has been substantial, but smaller.

She attributes the difference to three changes: economies use less oil per unit of GDP, countries have strategic petroleum reserves, and financial markets offer hedging instruments that were unavailable in the 1970s. For India, however, the shock remains serious because it imports more than 85% of its oil. Higher prices raise the import bill and put pressure on the rupee, inflation, and growth.

Bhattacharya warns that a prolonged price shock could become more damaging if it changes inflation expectations, prompting wage demands and business decisions based on persistently high prices. Extended disruption can also leave lasting scars through lost jobs, skills, and businesses.

She argues that India should reduce its dependence on imported oil, including by expanding non-fossil energy. She recommends Daniel Yergin’s The Prize and the film Syriana.

AI in rural education: useful support, not a substitute for teachers

Bhattacharya agrees that learning outcomes in rural government schools remain poor, citing ASER data on basic reading proficiency and the prevalence of small schools and multigrade classrooms.

She describes tablet-based learning trials in Tanzania, where children who initially could not read reportedly made measurable progress after 15 months. But she cautions that technology alone is unlikely to replace teachers over the long term. AI tools may help develop reading and maths skills, but students also need encouragement, motivation, mentorship, and a sense of belonging—human support that current AI cannot reliably provide.

India’s approach, she says, is to equip teachers with AI tools rather than remove them. That approach is also constrained by gaps in access: only around 57% of Indian schools have computers, and about 54% have internet access, with lower levels in some states.

Bhattacharya recommends Poor Economics by Abhijit Banerjee and Esther Duflo, and the film Stand and Deliver.

Technology booms, investment flows, and India’s semiconductor challenge

Bhattacharya says markets have repeatedly concentrated investment in a single promising technology, citing Britain’s railway boom in the 1840s, the US railroad expansion, and the dot-com boom. Such shifts can reshape markets but may also create bubbles.

She notes that foreign investors withdrew substantial money from Indian equities in 2026, while domestic investors—including mutual funds, pension funds, and insurance companies—helped cushion the outflows. Taiwan and South Korea have attracted investment in semiconductors and AI, while India is trying to build its own chip industry.

India’s semiconductor ambitions date back to the 1980s, but government delays and restrictive regulation reportedly deterred investors. The country subsequently built strength in software services, but Bhattacharya sees a two-sided challenge today: India risks missing investment in hardware while AI may also weaken demand for some software jobs. She says semiconductor investment will need to grow substantially for the industry to scale.

She recommends Chris Miller’s Chip War.

Infrastructure: improve forecasting, transparency, and design

Bhattacharya says cost overruns and delays are common globally, but cites Indian data showing substantial increases in the estimated costs of central infrastructure projects. Railway projects have seen major cost increases, while water-resource projects have performed worse. She also argues that public reporting on delays and overruns is less clear than it once was.

Drawing on research on megaprojects, she identifies two causes: “optimism bias,” where planners underestimate costs, and “strategic misrepresentation,” where sponsors deliberately understate them to secure approval. Her proposed remedies are to use historical project data to estimate likely costs and timelines, restore transparent project-by-project reporting, and use performance-based contracts.

She says flooding in Delhi and Mumbai is not simply a matter of spending more on infrastructure. Drainage systems were designed for earlier rainfall patterns, while encroachment on wetlands and floodplains, along with silt, plastic, and construction debris, further reduces their effectiveness.

Presenters and contributors: Apoorva Mandhani (host/interviewer); Dr. Bidisha Bhattacharya (economics expert).