Question

What do you understand by various circle of poverty?

Answer 1

Solution of Vicious Circle of Poverty:

Broadly, these two methods to solve the problem of vicious circle of poverty.

They are:

(I) Solution to the Supply side

(II) Solution to the Demand side. Let us explain these two aspects in detail.

A. Solution to Supply Side vicious circle:

1. Increase in Saving:

In order to get rid of supply side vicious: circle, in these countries; efforts should be made to increase savings so that investment in productive channels may be encouraged. To increase saving, expenditure on marriages, social ceremonies, etc. should be curtailed. In UDCs, the possibilities of voluntary savings are very less.

Thus, in this regard, Govt. interference is necessarily required. The Govt. can increase saving by altering its fiscal policy. The Govt. can impose heavy taxes on luxurious goods. Moreover, it can increase the role of direct taxes. Thus, the Govt. can curtail consumption by doing alterations in tax system.

Increase in Investment:

To break the vicious circle of poverty apart from increasing savings investment of saving in productive channels is also of immense use. The policies of short run and long run investment should be co-ordinated. By short period investment, people can get the necessary goods at fair rates, which will have favourable impact on their skill.

Moreover, along with short period investment, investment in the establishment of multipurpose projects, iron, chemical fertilizers should be properly encouraged. In UDCs, proper monetary and banking policies should be adopted which may provide facilities and encouragement to small savings.