In broad sense a state of unemployment appears when a labour does not obtain employment opportunity despite has willingness to work on existing wage rate.  India is a developing economy where the nature of unemployment is entirely different from that of developed nations.

Lord J.M. Keynes diagnosed unemployment in developed economies to be the result of a deficiency in effective demand.  It implied that in such demand for labour falls because the demand for the products of industry is no longer there.  According to Keynes such unemployment can be removed form the economy by increasing effective demand which in turn will increase labour demand to give motion to the machines in the economy. 

Contrary to it developing economies like India face the unemployment situation, which arises due to different reasons.  The labour force in India is rapidly increasing due to high rate of population growth. 

The employment readings from the NSSO and labour bureau data:

The data sourced from census 2011-12 shows that total employment in the economy has risen from 460.2 million in 2009-10 to 472.9 million in just two years.

Employment growth in the organized sector, public and private combined, increased by 2.0 per cent in 2012 over 2011, as against a growth of 1.0 per cent in 2011 over 2010. The annual growth rate for the private sector was 4.5 per cent in 2012 against a growth of 5.6 per cent in 2011; whereas the public sector registered a marginal growth of 0.4 per cent in 2012 against a decline of 1.8 per cent in 2011.

According to the fourth Annual Employment-Unemployment Survey conducted by the Labour Bureau during the period January 2014 to July 2014, the Labour Force Participation Rate (LFPR) (usual principal status) is 52.5 for all persons. The LFPR for rural areas at 54.7 is greater than that for urban areas at 47.2. The LFPR for women is significantly lower than that for males in both rural and urban areas. The Worker Population Ratio (WPR) reflects a similar pattern, with women having lower participation rate in comparison to men in both rural and urban areas. As per Census 2011 also, the workforce participation rates for females trails behind that for males.

The Unemployment Rate (UR) for persons aged 15 years and above according to Usual Principal Status (UPS) is 4.7 per cent in rural areas and 5.5 per cent in urban areas. The total UR reported is 4.9 per cent.

Another piece of good news is that the pace of structural transformation in the economy - that is, a shift in employment out of agriculture towards industry and services - has gained pace.

Different Types of Unemployment in India

Structural Unemployment

This type of unemployment is associated with economic structure of the country.  When demand for labour falls short to the supply of labour due to rapidly growing population and their immobility, the problem of unemployment appears in the economy.  Besides, due to growing population, rate of capital formation falls down which again limits the employment opportunities.  This type of structural unemployment is of long run nature.  Indian unemployment is basically related to this category of unemployment.

Under Employment

Those labourers are under employed who obtain work but their efficiency and capability are not utilised at their optimum and as a result they contribute in the production upto a limited level.  A country having this type of unemployment fails to exploit the efficiencies of their labourers.

Disguised Unemployment

If a person does not contribute anything in the production process or in other words, if he can be removed from the work without affecting the productivity adversely, he will be treated as disguisedly unemployed.  The marginal productivity of such unemployed person is zero.  Agriculture sector of underdeveloped/developing economies possesses this type of unemployment on a large scale.

Frictional Unemployment

The unemployment generated due to change in market conditions (change in demand and supply) is called frictional unemployment.  Agriculture is the main occupation in India.  The supply conditions still depend on weather’s mood and similarly demand conditions depend on availability of resources. Any change arising either of any or both creates a diversion from the equilibrium which results in frictional unemployment.

Seasonal Unemployment

Seasonal unemployment appears due to a change in demand based on seasonal variations.  Labourers do not get work round the year.  They get employment in the peak season of agricultural activities and become unemployed when these activities are over.  Indian agriculture ensures employment for only 7-8 months and labourers remain unemployed in remaining period. This temporary type of employment gives birth to seasonal unemployment.