Rating agencies should not view the Indian economy just through the prism of current account deficit (CAD) and fiscal deficit; rather they should take the fundamentals of the economy as well as its medium-term prospects into account while determining a rating for it, Confederation of Indian Industry (CII) Director General Chandrajit Banerjee said.

Global agencies like Moody's Investors Service Inc. and S&P have recently warned that India's sovereign rating outlook would depend on the depth of current economic downturn plus the trends in the BoP (balance of payments) condition.

But, Banerjee argued, "The rating agencies should look at the fundamentals of the economy and the medium-term prospects."

India has been in the tight grip of persistent economic slowdown. Its CAD jumped to an all-time high of 4.8 per cent of the country's gross domestic product (GDP) in the last financial year. It is still far higher than the government's affordable limit of around 2.5 per cent.

Investors are losing faith in India. As per official data, foreign investors withdrew a net $2.3 billion from Indian bond and stock markets last month.

Moody's warning followed S&P maintained its negative outlook on India's BBB- rating. It may be noted here that the BBB- is the lowest investment grade. Any further downgrade will push the economy into junk status.

Despite rating Indian economy at their lowest investment grade ratings, Moody's and Fitch Ratings, however, still have a stable outlook for the economy.