Home   »   Black Swan Events   »   Black Swan Events

Black Swan Events

 

Black swan events UPSC: Relevance

  • GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

 

Black swan event RBI: Context

  • Recently, RBI study has found that capital outflows of $100 billion (around Rs 7,80,000 crore) are likely to take place from India in a major global risk scenario or a black swan event.

 

Black swan event in India: Key points

  • The report called for maintaining liquid reserves to deal with the event which is known as black swan.
  • RBI has said that capital outflows, particularly, portfolio flows are driven by global risk aversion and they are sensitive to shifts in risk sentiment globally.
  • So, if there is an adverse event like “Covid-type contraction in real GDP growth” or “global financial crisis type decline in interest rate differentials”, India could see capital outflows to the tune of 3.2% of GDP or approximately $100 billion.

 

UPSC Current Affairs

 

What is a black swan event?

  • Black swan event meaning: A black swan is a rare, unpredictable event that comes as a surprise and has a significant impact on society or the world.
  • Three distinguishing characteristics – extremely rare and outside the realm of regular expectations; impact severely after they hit; and seem probable in hindsight when plausible explanations appear.

 

Origin of the term black swan event

  • Black Swan theory was put forward by Nassim Nicholas Taleb, author and investor, in 2001.
  • It was later popularised as a book where he does not try to lay out a method to predict such events, but instead stresses on building “robustness” in systems and strategies to deal with black swan occurrences and withstand their impact.
  • The term black swan is linked with the discovery of black swans.
  • Europeans believed all swans to be white until 1697, when a Dutch explorer spotted the first black swan in Australia.
  • The metaphor ‘black swan event’ is derived from this unprecedented spotting from the 17th century, and how it influenced the West’s understanding of swans.

 

UPSC Current Affairs

Black swan events in the past

  • 2008 global financial crisis was a black swan event that was triggered by a sudden crash in the booming housing market in the US.
  • The fall of the Soviet Union, the terrorist attack in the US on September 11, 2001, also fall in the same category.

 

Was COVID a black swan event?

  • Many experts argue that COVID was a black swan event. Taleb, however, does not agree. He called it a “white swan” event, as he believes it was predictable, and there was no excuse for companies and governments not to be prepared for something like this.

 

Read current affairs for UPSC

CIET (NCERT) wins UNESCO’s King Hamad Bin Isa Al-Khalifa Prize World Mental Health Report 2022 National Conference on Cyber Safety and National Security Single-use Plastic Ban to Effective from 1st July
MoHUA Launches NIPUN Scheme under DAY NULM Pragati Maidan Integrated Transit Corridor Critical Information Infrastructure (CII): Definition, Need and Protection UNHCR Report on Forced Displacement in 2021
Payment Vision 2025 Parliamentary Panel Report on Promotion and Regulation of E-commerce in India Major Economies Forum on Energy and Climate (MEF) Key Takeaways of WTO 12th Ministerial Conference
India-EU Free Trade Agreement (FTA): Negotiations Re-launched Desertification and Drought Day Criminal cases in Parliament: 40% Newly Elected RS MPs have Criminal Cases AGNIPATH Scheme: Age Relaxation and Anti-Agnipath Protests

Sharing is caring!