There is a newly available 150 Million middle-class with smartphones and Internet.

The huge market in each city (Bangalore alone has 1 Million IT folks, middle class is ~5 Million), the high density (10K/sqkm), high Internet penetration, make this a market comparable to the largest US cities. These cities now have critical mass to kickstart new product companies.

The daily friction of life is so high, that home delivery/ecommerce is changing the entire retail landscape including in food and groceries, and soon in services too.

Bangalore is on par with SF on food/grocery delivery, and perhaps ahead on services delivery (see home medical service startups like Portea.com).

Startups are not a bubble per se. We need more startups to smoothen out the rough edges of life in India.

However, late stage valuations may be in a bubble. In the early stage, valuations are moderate.

It is not a bubble. In fact, India's startup culture has emerged at the very right moment as more and more people are getting aware and connected to internet. And considering lack of technology companies in consumer sector except IT services firms, India's startups like FlipKart, Housing.com, etc have found the perfect timing to come up.