1. NATURE OF UNEMPLOY-

MENT IN INDIA

India is a developing economy, the nature of

unemployment, therefore, sharply differs from the one that

prevails in industrially advanced countries. Lord Keynes

diagnosed unemployment in advanced economies to be the

result of a deficiency of effective demand. It implied that in

such economies machines become idle and demand for labour

falls because the demand for the products of industry is no

longer there. Thus Keynesian remedies of unemployment

concentrated on measures to keep the level of effective demand

sufficiently high so that the economic machine does not

slacken the production of goods and services.

This type of unemployment caused by economic

fluctuations did arise in India during the depression in the

1930's which caused untold misery. But with the growth of

Keynesian remedies, it has been possible to mitigate cyclical

unemployment. Similarly, after the Second World War, when

war-time industries were being closed, there was a good deal

of frictional unemployment caused by retrenchment in the

army, ordnance factories, etc. These workers were to be

absorbed in peacetime industries. Similarly, the process of

rationalization which started in India since 1950, also caused

displacement of labour. The flexibility of an economy can be

judged from the speed with which it heals frictional

unemployment.