The correct option is C Assertion is correct but Reason is incorrect.
Vascular cambium is present in between primary xylem and phloem. During secondary growth, vascular cambium forms secondary xylem and phloem which increases girth or diameter of stem and roots. Hence, vascular cambium is called as lateral meristem. Therefore, assertion is correct. However, it does not give rise to lateral shoots.
Thus, the correct answer is option C.