A Decade’s Happening In Weeks Moment?: AI Reshaping Economy, Jobs and Political Landscape

Earlier, industrial change was gradual, allowing time for adaptation. With the rise of generative AI tools like ChatGPT and Claude, disruption has accelerated dramatically, compressing years of transformation into weeks and rapidly reshaping markets, jobs, and industries.

Market Panic and the Shift to Skilled Labour Replacement

• Market Impact : A research note by the firm Citrini recently sparked significant fear in markets, leading to a drop of over 800 points in the Dow Jones Industrial Average.
• Targeting Skilled Labour : Unlike previous waves of automation, the current AI disruption is not just for basic tasks; it is specifically designed to replace highly skilled labour.

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Destruction of “Information Asymmetry”

• Economic Disruption: AI is expected to disrupt businesses that profit from Information Asymmetry—situations in which a seller has more information than a buyer.
• Eliminating Middlemen: Industries like travel agencies, real estate, and certain retail sectors rely on a knowledge gap to generate profit. 
  • AI can bridge this gap by finding the best prices and options for consumers directly, potentially eliminating the need for third-party service providers.

Macroeconomic Chain Reaction

• Mass Income Destruction : The loss of white-collar jobs could lead to widespread income decline.
• Demand Collapse : When people lose their purchasing power, total market demand falls, leading to company failures and a stock market crash.
• Flight to Safety : The fear of a major economic recession has driven investors toward gold and silver, pushing their prices to record highs.

Shifts in Corporate and Global Power

• Valuation Disparities : The US-based AI company Anthropic (the parent of Claude) has reached a valuation exceeding the combined value of major Indian IT firms like TCS and Infosys, despite being much younger.
• Loss of the “Cheap Labour” Advantage: Historically, developing nations in the Global South used cheap labour as a competitive edge. 
  • AI and robotics are neutralising this advantage, as seen with Chinese EV giant BYD, which uses extensive robotics to produce cars with minimal human workers

The Specific Challenge to India

• Service Sector Vulnerability: India transitioned from an agriculture-dominated economy to a service-led growth model, with limited large-scale manufacturing absorption.
• White-Collar Risk: As AI increasingly automates coding, analytics, and administrative functions, the core service-sector jobs that ensure stable middle-class employment face heightened disruption, weakening the traditional employment security associated with higher education.

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Policy Recommendations

• Reskilling: Governments have a limited window to redesign education and skilling systems to prepare youth for emerging AI-driven roles while facilitating transitions from vulnerable occupations.
• Universal Basic Income (UBI): Policymakers may need to consider UBI or similar income-support mechanisms to cushion workers displaced by automation and technological disruption.

Conclusion

Proactive intervention is essential, as unmanaged AI-led disruption could destabilise labour markets, widen inequality, and threaten broader social cohesion.

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