With the rise of Artificial Intelligence (AI), preparing itself accordingly and scaling up manufacturing sector are essential for India to meet the demand for jobs from a dramatic surge in working age population, according to Paul Krugman, who won the Nobel Prize in economics in 2008 for his work on international trade theory.

While speaking at News18 event, Krugman has warned that India could end up with huge mass unemployment if it does not grow its manufacturing sector and focus on it's betterment policies too just like service sector.

He said that, there is this concept called artificial intelligence that India should be wary of. In future, while diagnosis may be outsourced to a doctor in India, it could also go to a firm based on artificial intelligence. Things like this could be a cause for worry for Indian services sector.

Krugman cited the examples of Japan and China to emphasize his point as he said, "Japan is no longer a superpower because its working-age population declined, and China is looking the same. In Asia, India could take the lead but only if it also develops its manufacturing sector, not only the services one,” Krugman added.

And, by saying this he's quite evidently right, as last year a Japanese AI startup partnered with an Indian university because of the very fact that Japan’s information technology industry is facing a scarcity of skilled workers.

The Japan Times reported last year that as Japan’s population ageing, the supply of young laborers within the construction field has decreased drastically resulting many companies in the country are turning to Robots to fix this.

On the other hand, India -- according to Krugman -- can ride the next wave of globalisation on its demographic dividend as, unlike to Japan, India's working-age population is projected to grow substantially. He, however, emphasized and warns that India’s lack in the manufacturing sector could work against it, as it doesn't have the jobs essential to sustain the projected growth in demography.

The above development was first reported in Economic Times.

Krugman said that India has achieved much more economic growth in 30 years than Britain had achieved in 150 years, but what made the feat less conspicuous was the high level of income inequality in the country.

Notably, India's strong area is its service sector and not the manufacturing sector. IT sector has been the leading driver of India’s services exports. In 2016-17, the US accounted for 57% of India’s total $111 billion of computer software and IT-enabled services exports, according to Electronics and Computer Software Export Promotion Council (ESC), the Press Trust of India reported on 25 January.

In a short extract, Krugman means to explain that India's service sector gives an edge in the world because of its large young population and as AI is on the rise, a large part of service industry backed by manpower of young people it might go into hands of AI and automation, making India go behind. In Asia, India could take the lead but only if it also develops its manufacturing sector, not only the services one. It must be recalled that, in January 2017 Indian IT giant Infosys had replaced 9,000 of its employees with automation and AI.

Krugman thus says that while India has a first mover advantage in the global services trade, that alone is not sufficient to provide employment in the scale that India needs.

Additionally, Krugman also hinted that deployment of artificial intelligence for services like interpretation of medical data can impact offshoring of that requirement to emerging countries.

To recall, in this year's Asia's startup-friendly countries list, India stood at 8th rank behind China and even Malaysia because of the very fact that it is still the poorest country in Asia with GDP per capita of $1,710, in 2017 and a high unemployment rate which Krugman warned of.

Top Image- Vox.com

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