NEW DELHI (AFP) - Police in the Indian capital said on Wednesday they have broken up an illegal adoption racket in which newborn babies were stolen from hospitals and sold to couples.

Police have arrested three members of a group operating a fake charity in New Delhi that allegedly sold two dozen babies and toddlers to couples for up to 550,000 rupees (S$11,567) each.

"The children were either stolen at birth, (or later) kidnapped or bought from poor parents," Dependra Pathak, joint commissioner for southwest Delhi, told AFP.

"It was a sophisticated racket and so far they have confessed to selling 24 babies," Pathak told AFP.

Two children were rescued at the fake charity's offices during a raid on Monday following a sting operation in which undercover officers posed as a couple seeking to adopt, he said.

The three arrested have been remanded into police custody for further questioning.

Delhi police are also seeking assistance from other states from where the babies and children were apparently trafficked by agents, in the hope of reuniting some with their birth parents.

Kidnapping and trafficking children in India has long been a major problem, with many sold to unscrupulous employers for use as cheap labour.

The racket in Delhi involved prospective adoptive mothers being admitted to private clinics where they were given a false record of having delivered a baby as well as a birth certificate for their "newborns", Pathak said.

Experts say couples wanting to legally adopt in India are often frustrated by lengthy bureaucratic delays and complex rules.

But the illegal adoption market is thriving, with babies and children abandoned by their families given straight to prospective parents. Desperately poor parents also sell their children, while others are kidnapped by traffickers, experts say.

India has an estimated 30 million orphans. But only 4,354 children were legally adopted in 2013 and 2,500 in 2014, according to the government's central adoption resource authority.