Q.Explain the meaning of the 'vicious circle of poverty' with reference to the production/investment side.

Low income leads to low savings, low investment, low productivity, and back to low income again — a closed, self-repeating loop.

The vicious circle of poverty describes poverty as a self-perpetuating cycle rather than a one-time condition. On the production/investment side, the loop runs:

Low Income → Low Savings (a poor household or economy can save very little out of an already-low income) → Low Investment (little capital is available to invest in better tools, irrigation, or machinery) → Low Capital Formation and Low Productivity (without investment, output per worker stays low) → Low Output → Low Income again, closing the loop back to where it started. …