‘Black swan’ event may trigger around Rs 7.8-lakh-cr outflow

‘Black swan’ event may trigger around Rs 7.8-lakh-cr outflow

Subject: Economy

Context: According to a recent RBI report a black swan event can lead to massive pull out of Capital outflows

What is Black Swan?

Nassim Nicholas Taleb, a former Wall Street trader, in his book ‘The Black Swan: The Impact of the Highly Improbable’ formulated the black swan theory.

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.

Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.

• Is so rare that even the possibility that it might occur is unknown
• Has a catastrophic impact when it does occur?
• Is explained in hindsight as if it were actually predictable

There are no limitations in the way a Black Swan event can manifest itself. It could be anything from a natural disaster to a war, a financial crash or the outbreak of a virus.

Is the Covid-19 pandemic a black swan event?

• Taleb does not agree with those who believe it to be one. In an interview to Bloomberg in 2020, he called it a “white swan”, arguing that it was predictable, and there was no excuse for companies and governments not to be prepared for something like this.
• While the outbreak of any pandemic is difficult to individually predict, the possibility of one occurring and having a major impact on systems around the world was known and documented.