The doctors' body said that the government should have waited for the report of the Delhi Medical Council (DMC) on the issue which is expected in a few days.
It said it will give a call for a strike if needed and will appeal to the government to revoke the licence cancellation decision.
Echoing the Indian Medical Association (IMA), the DMA said that while the investigation against the doctors concerned was expected, the decision to cancel the hospital licence was harsh.
"Cancelling the licence and the decision to shut the entire hospital is irrational and autocratic. Private hospitals bear 80 per cent of the patient's burden in Delhi. Investigation against the concerned doctors or staff is expected but why should all other departments and the hospital suffer," DMA's Ashwini Goyal said.
In the licence cancellation order, which came after a three-member panel submitted a report to Delhi Health Minister Satyendar Jain, the government has stopped the hospital from admitting any new patient and put a stop to all outpatient treatment services and laboratory testing on its premises with immediate effect.
The baby boy, who was 22 weeks premature, was declared dead by the hospital on November 30 and handed over to the parents in a plastic bag, along with his still-born sister.
However, the baby started moving while being taken for last rites. The baby was then admitted in North Delhi's Agarwal Nursing Home, but died on Wednesday.
The IMA yesterday termed the cancellation of the licence "too harsh a step". It backed the hospital and said if all hospitals start facing similar situations where patients die due to such mistakes, then healthcare will come to a halt.
IMA President KK Aggarwal, a cardiologist, said the government decision was "not in the interest of the society".
"I personally feel it was wrong. The government has taken a wrong decision... For a mistake that occurred at the level of a doctor, the licence of the hospital cannot be cancelled," he said.