Correct Option
The correct option is 2 only.
Explanation
The question refers to a standard case study (Swapna) used in economic texts to illustrate the concept of a Debt Trap. In rural economies, credit acts as a double-edged sword: it can either increase earnings or, in cases of high risk and crop failure, push the borrower into a situation where recovery is difficult.
Statement-wise Analysis
- Statement 1 is Incorrect: In the referenced case study, the crop did not result in a bumper harvest. Instead, the crop was hit by pests and failed despite the use of pesticides. Consequently, repayment was not easy or possible from the farm earnings.
- Statement 2 is Correct: Due to the failure of the crop, the borrower was unable to repay the loan, and the liability increased over time. This situation, where credit pushes the borrower into a condition from which recovery is painful, is the definition of a debt trap.
- Statement 3 is Incorrect: Since the farm income was insufficient to cover the loan and accumulated interest, the borrower was forced to sell a portion of her land to settle the debt. Repayment was not achieved without the liquidation of assets.
Key Takeaway
Debt Trap: A situation where a borrower is unable to repay a loan because the return on investment (e.g., crop yield) fails, often forcing the sale of assets (collateral) to settle the dues, thereby worsening the borrower's economic condition.