Letter from Delhi : India's Sensex bull

This past week may come to be viewed as one of the most important in India's economic history.

Call it irrational exuberance. Call it naive optimism.

But there is more to that statement than mere journalistic hyperbole.

For in the past seven days the country has witnessed two economic events of immense consequence:

• The Bombay Stock Exchange's benchmark Sensex index crossed the 10,000 threshold for the first time in its history

• The government launched its poverty-busting National Rural Employment Guarantee Scheme - a scheme of such ambition and scale that it has invited comparisons with Franklin Delano Roosevelt's New Deal.

There was an almost orgasmic reaction to the Sensex crossing the 10,000 mark - a moment of frenzy lent even more excitement because it virtually coincided with Sachin Tendulkar blasting a century against arch rivals Pakistan.

Traders apparently punched the air in delight, exchanged western-style 'high fives,' and scoffed celebratory chocolate cakes.

Then they savoured the prospect that the Sensex would end the year at 12,000.

'Christopher Columbus moment'

'Tensex', 'Shareway to Heaven', '10K', 'Sensex Atop Magic Mountain' - the country's headline writers also had a sugar rush.

The soaring Sensex has become a symbol of India's growing economic self-confidence.

More important, the current spurt in the price of leading shares has reflected the confidence of overseas investors.

One fund manager said that the Sensex had just experienced its Christopher Columbus moment : Indian shares had just been discovered by the rest of the world.

Unquestionably, global fund managers have woken up to the earnings potential of India's corporate titans - Tata Steel, Tata Motors, Reliance, the blue-chip stocks, which lend the Sensex its sheen.

As the Sensex went from 9,000 to 10,000, foreign investors invested $3bn in the market.

There has been nervous talk of an Indian bubble - that shares are over-valued and that a correction in the market is imminent.

Yet with the Indian economy pegged to grow at over 8% - of the world's 20 largest economies only China has a higher growth rate - the startling rise in the stock market is surely more than illusionary.

'Economic celebration'

If the rising stock market is bringing cheer to the Indian middle class, then the Rural Employment Guarantee Scheme is aimed at ameliorating the condition of the poorest of the Indian poor.

Launched with the promise of giving 60m households a measure of financial protection, through guaranteed work and unemployment benefit, it would be easy to write off the scheme as a political ploy - an attempt by the Congress Party-led coalition to curry favour with the very voters who brought them to power.

The less cynical interpretation is that this is a genuine and long overdue effort to address India's gravest problem and greatest shame - that up to 400m of its people live below the poverty line, the world's largest number of poor people in any single country.

Corruption and bad governance, two other Indian afflictions, are almost certain to limit the scheme's effectiveness.

But the programme is underpinned by honest redistributive intent, a belief that as the country grows economically and its tax coffers swell, all its citizens should come to enjoy a more abundant life.

So the rural poor and the urban rich have both had cause for economic celebration - which, if not entirely unprecedented, is something of a novelty.

The bulls are roaring on Dalal Street, the home to the Bombay Stock Exchange.

And a measure of relief may finally be at hand for the country's 'bullock cart belt.'

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