Addressing the G20 Summit here, the prime minister also urged the developed world to desist from pursuing policies that restrict inflows of labour in rich countries.
"The policy of unconventional monetary expansion in advanced countries had some success but it also had spillover effects. When policy was being loosened, there was a surge in capital flows to emerging markets, which helped some countries finance their current account deficits while generating upward pressure on the currencies of other countries," Manmohan Singh said.
"With markets now anticipating a reversal, we are seeing a large outward flow from emerging markets. Since most emerging markets now operate with flexible exchange rates, they have experienced varying degrees of currency depreciation, posing problems in many cases," he said.
Referring to the recent volatility in the Indian currency markets, the prime minister said it happened because the inflows of foreign funds "suddenly dried up".
The Indian rupee has depreciated by almost 20 percent against the US dollar since the beginning of the current financial year. The currency recently hit a record low of near 69 against a dollar.
"India has been affected by currency volatility in the past few weeks. One reason for this is that we had a high current account deficit of 4.8 percent of our GDP in 2012-13. This was easily financed when flows were ample. It became a problem when flows suddenly dried up," he said.
Manmohan Singh said the Indian government target to contain the current account deficit to 3.7 percent of gross domestic product (GDP) in the current financial year and intend to reduce it further to nearly 2.5 percent.
India's current account deficit hit a record high of USD 88.2 billion, or 4.8 percent of GDP, in the financial year ended March 31. This fiscal year the government target to contain the current account deficit at USD 70 billion
"We are taking steps to finance this deficit by establishing a macroeconomic environment that is seen to be friendly to stable foreign flows," he said.
Manmohan Singh urged the rich nations not to restrict the movement of labour.
"International labour mobility in high end skills has become an important lubricant of global integration across countries. Pending the evolution of an international agreement on these issues, we must do whatever we can to avoid new restrictive measures in this area," he said.
"A strategy for job creation in developing countries must include stronger efforts to impart employable skills to the labour force. We can learn from international experience in this area, including the experience of industrialised countries," he said.
"We also need better functioning labour markets in both industrialised and developing countries," the prime minister added.
(Arvind Padmanabhan can be reached at email@example.com)
--IANS (Posted on 05-09-2013)