The U.S. Treasury should not label India a currency manipulator, the country's former top central banker said on Thursday.

"I don't suspect the Treasury will do that, but it shouldn't, even if it's thinking of it," Raghuram Rajan, a former governor of the Reserve Bank of India, said on the sidelines of the Barclays Asia Forum.

The comments from Rajan, currently a professor at University of Chicago Booth School of Business, came after the U.S. Treasury said it would be "closely monitoring" India's foreign exchange and macroeconomic policies in its latest report on its trading partners' exchange rate policies.

Although India was not added to the Treasury's official monitoring list, the country was flagged for the uptick in its net foreign exchange purchases in the first half of 2017. That figure had increased to $42 billion, or 1.8 percent of India's GDP, according to the report.

The three criteria used by the Treasury to determine "unfair" currency practices are:

A bilateral trade surplus with the U.S. amounting to at least $20 billion

A current account surplus at least 3 percent of the country's gross domestic product

Net purchases of foreign currency amounting to at least 2 percent of the economy's GDP over a 12-month period

While India's trade surplus with the U.S. stood at $23 billion in the year ending in June, it did not meet the other two criteria.

Rajan pointed out that India ran a current account deficit "which could get larger if the price of oil rises." India's current account deficit in the quarter ending in June stood at $14.3 billion, or 2.4 percent of its GDP, according to the RBI.

As for the increase in foreign exchange purchases, Rajan explained that India needed its own foreign currency reserves in the event of capital outflows.

"India needs to build reserves in order to protect against outflows. We can't keep running to the IMF for help as a large country and politically, it's very difficult ... So reserves should be seen as a macro prudential tool," he said.

Rajan added that it was difficult to label a country a currency manipulator simply on the basis of one metric, especially given how "nobody could accuse India" of holding the exchange rate at a "grossly undervalued level."

— CNBC's Yen Nee Lee contributed to this report.