“Prepare for an AI jobs apocalypse,” the Economist warned on May 14. It went on to explain: “Never before in modern history has technological progress hurt the overall demand for labour.”This is a warning that is of special relevance to India.Until the advent of Artificial Intelligence, all technological advances displaced humans only from some forms of work, not all. In the early part of the 20th century, mechanisation reduced demand for manual labour in agriculture and manufacturing to produce material goods. Humans moved up the value chain to more skilled work in manufacturing and into the service sector. “Blue collar” work was reduced, “white collar” work increased.In the next wave of technological progress towards the end of the 20th century, computerisation advanced into services, and improved the productivity of white-collar workers also. Then the “knowledge economy” grew. Humans moved further up the value chain into work requiring human intelligence.The “productivity” of a country adopting technology, defined as its total economic output divided by the number of its citizens, went up with every major technological advance. With each wave, wages increased and lifestyles improved. After each technological disruption, employment stabilised and at higher levels of wages.Workers assemble a car at the Tata Motors factory in Pune in September 2004. Credit: AFP.AI has changed the relationship between a country’s rate of adoption of new technologies and its employment potential. AI is displacing human intelligence from production and delivery processes in all sectors: manufacturing, services and even knowledge sectors like education.With AI, the overall “productivity” of an economy (its output divided by the number of its citizens) may increase. But employment of humans will reduce and wage levels will fall too.This will aggravate economic problems. While investments may pour into the AI sector and towards firms that develop, sell, and deploy AI faster than others, overall purchasing power within the economy will reduce, and investments in productive sectors will also reduce.This will create a vicious downward spiral in real growth, while the financial valuations of AI companies will soar into trillions of dollars.AI is destabilising economies. Nevertheless, all countries are rushing like lemmings towards an economic apocalypse. India is nearer the cliff edge than others because of its demographics.A comparison of India and China is revealing. AI is advancing rapidly in China. Barclay’s Bank estimates that humanoid robots could replace almost two-thirds of China’s labour force by 2035. They could do much of the work in the country’s giant manufacturing sector, according to Barclays.This does not worry China because its population of youth needing employment is shrinking. It needs more robots to replace them to keep up its economic growth. India (and other countries) see this as an opportunity to take manufacturing jobs from China to serve global markets.However, India’s demographic picture is not the same as China’s. India needs to create more work for its youth whereas China will soon need robots to do the work. So do Japan and Korea, which already have shortages of workers with their ageing populations.What is worrying the Chinese government about a technology-empowered economy is the poor quality of work and the low levels of wages and social security that are a consequence.Economic growth is not producing good jobs. Incomes and savings to invest are not growing in the gig economy. The government must step in and invest in economic growth and improve social security. For now, the Chinese government has enough financial headroom for this. India’s government does not.A worker monitors products for export at a packaging factory in Lianyungang, in China’s eastern Jiangsu Province, in May. Credit: AFP.The Indian government and Indian companies are trying to stay abreast of the AI tsunami. India is inviting US tech companies to develop their AI models further in India, using Indian talent and the data of Indian citizens.Workers in Indian factories are assisting AI developers to train robots that will replace them. The workers know what impact it will have on their future. A worker in a factory, wearing sensors to track how he does his work to train an AI robot to replace him, says: “To me it feels like working in your own grave, while you make your own casket.”Human dignity does not figure in an economic formulation of productivity. Blunt talk by some business leaders about AI’s impact is drawing backlash. The CEO of London-based Standard Chartered Bank sought to reassure employees after the Bank announced plans to eliminate 8,000 support jobs over the next four years as it relies more on A.I.“It’s not cost cutting,” he said. “It’s replacing in some cases lower-value human capital with the financial capital and the investment capital we’re putting in.”India’s population of youth aged 15 to 29 is the largest in the world. They are unable to find dignified employment which will provide them with adequate economic security. Chief Justice of India Surya Kant, noting their frustration, unwittingly described them as “cockroaches”.He promptly clarified that he was not wishing to demean the youth. He implied that he was pointing to the systemic problem of the Indian economy. The employment elasticity of India’s economy (the number of jobs each unit of GDP produces) is the lowest in the world. This is leading to enormous social and economic problems, signs of which are clearly visible.India is neither China nor the US. India’s economic growth model must be different. The Indian economy is abundant with human capital; financial capital is relatively scarce. Every firm that uses more AI to improve its own “productivity” (as economists define it) by reducing the numbers of humans it employs, replacing them with robots and AI systems, will need more financial capital.Rather than chasing investors for more AI ventures, India’s policymakers, and Indian companies, should tap into the abundance of human capital in the country. They should adopt a different formulation of productivity. Productivity must be measured by the number of decent jobs each unit of financial capital produces, rather than the financial output produced by employing fewer humans.This is the fundamental economic reform required in India. It is a new way of thinking. From it will follow the right labour reforms, as well as the right investment and trade reforms.Arun Maira is the author of Reimagining India’s Economy: The Road to a More Equitable Society.