AirAsia has outlined ambitious plans to launch an Indian budget airline.

The new carrier will take to the skies in partnership with Mumbai-based Tata and a third Indian investor, Telestra Tradeplace.

It comes as domestic Indian carriers - such as Kingfisher and Air India – struggle to stay afloat.

The three investors believe India is ready for a low-cost airline and are seeking approval from the Indian government.

India liberalised its aviation market, inviting international entrants, in late 2012.

Companies based outside the country can now own up to 49 per cent of an airline.

The new carrier would be based in Chennai in southern India and would be operated by AirAsia.