Q.Elucidate major cause of vicious circle of poverty with diagram.

The vicious circle of poverty means low income keeps saving, investment and productivity low, which in turn keeps income low — a self-repeating trap; capital deficiency is its core cause.

The vicious circle of poverty, explained by Prof. Ragnar Nurkse, describes how underdeveloped countries remain trapped in poverty. In his words, "a country is poor because it is poor."

Major cause — deficiency of capital (low income):

The root cause is low real income. On the supply side, low income leads to low saving, low saving means low capital formation and low investment, which keeps productivity low and therefore income low again.

The circle (diagram described in words):

The relationship forms a closed loop:

Low Income → Low Saving → Low Investment → Low Capital Formation → Low Productivity → (back to) Low Income

On the demand side, low income means low purchasing power, so the market is small, investment is discouraged, productivity stays low, and income remains low.

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