At least 43 people were killed in a devastating fire that ripped through a bag factory in the cramped, congested old quarter of the Indian capital New Delhi, trapping scores of workers who were sleeping inside.

The blaze was the worst in Delhi since 59 movie-goers died in a cinema in 1997, with the city's poor planning and enforcement of building and safety regulations often responsible for such deadly incidents.

Tearful relatives spoke of receiving desperate calls from factory workers from around 5am pleading to be freed from the inferno in the premises in the commercial hub of Sadar Bazar.

The four-storey building was home to a series of manufacturing units producing items including schools bags and packing materials which only worsened the spread of the fire, officials said. Locals said the factory also made purses. 

"Most of the casualties happened because of suffocation," witness Mohammed Khalil said.

"After the fire, people didn't have any way to get out and I believe many were asleep and because of the smoke, they got suffocated."

Locals had called the police and emergency services as the blaze lit up the early morning sky, but firefighters struggled to reach the victims amid the narrow lanes.

Police and fire officials said at least 58 others were rescued, with local television networks airing footage of firemen carrying people out of the narrow lanes to nearby emergency vehicles.

The flames had been extinguished and they did not expect to find more bodies, officials added.

Authorities said they did not yet know the cause of the blaze but Delhi's fire services director told the Press Trust of India the site had been operating without the required fire safety clearances.

Many factories and small manufacturing units in big Indian cities are often located in old, cramped areas, where the cost of land is relatively cheaper.

Such units often also serve as sleeping quarters for poor, mostly migrant, workers, who manage to save money by staying overnight at their workplaces.