The fire quickly spread upwards from the basement, trapping almost two dozen workers on the upper floors, said an official at the capital's emergency service. The fire was doused after three hours.
"Prima facie it appears packaging of the fire crackers were going on, but no machines have been found", he said.
Prime Minister Narendra Modi said he was "deeply anguished" by the accident.
North Delhi Mayor Preety Agarwal also visited the site and took a swipe at Kejriwal as the area falls under DSIIDC.
Policemen comfort the relative of a man who died in the factory fire in Bawana.
However, Delhi Police put the number of casualties in the incident at 4. According to the reports fire in Bawana industrial area was reported to the control room around 6.20 p.m., following which 10 fire tenders were rushed to the spot. Police sources said casualties may rise. The blaze spread rapidly since a lot of plastic material present in the building caught fire instantly.
Delhi Chief Minister Arvind Kejriwal said he was also keeping a close watch on rescue operations.
A compensation of Rs five lakh each will be given to the next of kin of those who have lost their lives and Rs one lakh each to the two injured persons, he told reporters.
Delhi Urban Development minister Satyendar Jain said an inquiry has been ordered into the incident.
Two people suffered injuries and were taken to hospital, he added. Several casualties reported. Monitoring the situation. "Some of the victims were sitting or lying on the floor close to each other", chief fire officer Atul Garg said. "May those who are injured recover quickly", the prime minister's office tweeted.