The correct option is 2 and 3 only.
Explanation
The question addresses the Vicious Cycle of Poverty and the phenomenon of the Debt Trap. Indebtedness among the poor is often structural, driven by economic vulnerability, lack of access to formal credit, and the absence of social security nets. These factors compel the poor to borrow under exploitative conditions, thereby reinforcing their impoverished state.Statement-wise Analysis
- Statement 1 is Incorrect.
The availability of permanent and secure work provides a steady income, which helps individuals plan finances, accumulate savings, and avoid distress borrowing. Conversely, it is the casual, irregular, and insecure nature of work (such as daily wage labor) that creates income volatility, forcing the poor to borrow for consumption needs during lean periods.
- Statement 2 is Correct.
The poor often lack access to formal banking systems due to a lack of collateral or documentation. Consequently, they rely on informal sources like moneylenders who charge exorbitant interest rates. Repaying these high-interest loans consumes a significant portion of their meager income, preventing capital formation and keeping them trapped in debt.
- Statement 3 is Correct.
Assets serve as a buffer against economic shocks (e.g., illness, crop failure, or natural disasters). The poor typically suffer from a lack of assets (land, gold, or savings) that could be liquidated to meet emergency expenses. Without assets to sell or pledge as collateral for low-interest formal loans, they are compelled to borrow from exploitative sources to survive shocks, further deepening their indebtedness.