There is lot of policy uncertainty right now: Raghuram Rajan

Former RBI governor Raghuram Rajan, who is now Chicago Booth School professor, said there is policy uncertainty for the world economy presently as a bunch of new leaders are proving they are strong.

"This is the first time in a long while we have seen all the big engines firing at the same time including the large emerging markets ... We have seen trade picking up. We are seeing early signs of investment intentions. Of course there are always clouds. There are clouds this time also," said Rajan.

In an interview to CNBC, Rajan, who did not specifically mentioned India, said good news is some of the fears about the (Trump) administration that it would move immediately to a more protectionist stance haven't played out.

"There have been noises but of course the strong action that some people feared against Mexico, against China hasn't really materialised. That's the good news," he said while referring to Donald Trump administration in the US.

Talking about the possible risks before the world economy, Rajan who served as RBI governor for three years, said, "There is lot of policy uncertainty right now because of the work the (US) administration is going to do and how much it can achieve.

"But also there is geo-political risk. We have a bunch of strong leaders around the world who are already well entrenched in their strength.

"We have a bunch of new leaders who need to prove themselves that they are strong. And in that kind of environment, who has room to back off if in fact there is a confrontation. We have many areas of confrontation."