The correct option is 2 only because the Sarvastivadin school did indeed propose that the constituents of phenomena (dharmas) exist in a latent form, arguing against the idea of complete momentariness. This aligns with their philosophy that these elements are eternal, although they manifest in various forms throughout time. In contrast, Sautrantika and Sammitiya are actually schools of thought within Buddhism, not Jainism, clarifying why statement 1 is incorrect. Such distinctions in religious philosophy are crucial for understanding the diverse landscape of Indian religious thought, which is often tested in UPSC Prelims.