The correct option is (c) 1 and 3 only
Explanation
The "cycle of poverty" or the "vicious circle of poverty" refers to a phenomenon where poor families become trapped in poverty for at least three generations. This cycle is characterized by low income, leading to low savings and low investment, which results in low productivity and continued low income. For landless labourers, this is exacerbated by a lack of physical assets and financial exclusion.
Statement-wise Analysis:
- Statement 1 is Correct: Landless labourers and rural poor households often suffer from "time poverty." A significant portion of their time is spent on non-monetary, subsistence activities such as collecting firewood, fetching water, and grazing cattle. This drudgery reduces the time available for skill acquisition or wage-earning employment, thereby perpetuating their low-income status.
- Statement 2 is Incorrect: A defining characteristic of the poverty cycle is the inability to generate a surplus. Due to low wages and irregular employment, landless labourers spend almost their entire income on basic consumption (food, shelter, health). Consequently, the marginal propensity to save is negligible, making it nearly impossible to accumulate capital or purchase new assets annually.
- Statement 3 is Correct: Formal financial institutions typically require collateral (such as land or property) and documentation for credit. Landless labourers, lacking these assets, are often excluded from the formal banking system. They are forced to rely on informal sources like local moneylenders who charge exorbitant interest rates, often leading to a debt trap that reinforces the cycle of poverty.
Key Takeaway:
The cycle of poverty is driven by the interdependence of low income, lack of savings, and reliance on high-cost informal credit, which prevents the accumulation of productive assets and human capital.