With reference to the "Capital formation" which of the statements is/are correct?

1. Process of capital formation depends on savings and effectiveness of financial institutions.
2. Investment is the essential factor of capital formation.

Select the correct answer using the codes given below.
Codes :

A) Only 1

B) Only 2

C) Both 1 and 2

D) Neither 1 nor 2

This MCQ is part of the UP PSC Previous Year Questions (PYQs) series, focusing on UPPSC Prelims 2021 (GS Paper I)