At least 43 people have died in a devastating fire at a building in a crowded grains market area in central New Delhi.

Firefighters fought the blaze from 100 metres away because it broke out in one of the area's many alleyways, tangled in electrical wire and too narrow for vehicles to access, authorities at the scene said.

The fire started at a factory space near Sadar Bazaar, New Delhi's largest wholesale market for household goods.

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Assistant New Delhi police commissioner Anil Kumar Mittal said "the fire appears to have been caused by electric short circuit," adding that authorities were investigating whether the factory was operating legally.

Many of the victims were factory workers who were asleep when the blaze began, according to Yogesh, a police spokesman who uses one name. Police are investigating whether the factory was operating legally, he said.

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Dr Kishore Singh said rescuers brought victims to his government-run hospital and two others in the city. Another 16 people were being treated for burns or smoke inhalation and were in stable condition, Mr Singh said.

Fire Services chief Atul Garg said the blaze was put out by 25 fire engines and that the rescue operation was completed.

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About 60 people, including casualties, were taken out of the building, according to police spokesman Arun Kumar Mittal.

The cause of the fire, which erupted at about around 5.30am, was not immediately clear.

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New Delhi's chief minister Arvind Kejriwal appeared at the scene of the fire, promising victims' families compensation.

Manoj Tiwari, a Bharatiya Janata Party lawmaker from New Delhi, said most of the casualties occurred on the third floor of the building.

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Prime Minister Narendra Modi described the fire as "extremely horrific".

"My thoughts are with those who lost their loved ones. Wishing the injured a quick recovery," Mr Modi tweeted. Authorities are providing all possible assistance at the site of the tragedy, he said.

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Fires are common in India, where building laws and safety norms are often flouted by builders and residents.

In 1997, a fire in a cinema in New Delhi killed 59 people. In February this year, 17 people were killed by a fire in a six-storey hotel in the Indian capital that started in an illegal rooftop kitchen.

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