NEW DELHI (AFP) - Police in northern India said on Wednesday that they had arrested a 47-year-old man for selling his newborn grandson to a local businessman in a deal that was struck on Facebook.

Feroz Khan, a resident of Ludhiana city in the northern state of Punjab 300 kilometres from New Delhi, had allegedly kidnapped his grandson shortly after he was born earlier this month.

Khan sought help from two temporary employees at a local hospital where his daughter gave birth, who contacted the buyer on Facebook and arranged the deal for 45,000 rupees (S$1,029).

"All three people who conspired to sell the child have been arrested and we will be interrogating the businessman who paid the money to buy the baby," senior Ludhiana police officer Satish Malhotra told AFP.

Police have rescued the baby and returned him to his mother Noori Khan, a divorcee, who had lodged the complaint against her father.

The three accused have been charged with kidnapping and they will be produced before a court on Wednesday. If proven guilty, they could be jailed for seven years.

In 2011, the country's federal police admitted in court that there were 815 gangs comprising more than 5,000 members involved in the kidnapping of children for prostitution and begging across India.