The Sagarika / Dhanush is a submarine-launched cruise missile designed and developed by India's Defence Research and Development Organization (DRDO) with the help of Russian engineers. The liquid-fueled launch system is reportedly based on the Russian-derived Prithvi design, while the inertial guidance system is locally-made. Development may have started in 1992, although a failed test launch of the Dhanush was conducted in April 2000. The successful cruise missile test in June 2001 (so far ignored by foreign media) may have been an improved Dhanush. Once fully tested, the Sagarika is slated to see service on India's new nuclear-capable submarine program.
According to FAS reports, the Dhanush is the medium-range ship-launched version of the sub-launched Sagarika missile, although from the Star News broadcast, I gather they are one and the same, with the 2001 test version launched from a landbound base. The FAS and the New York Times repeatedly refer to the Sagarika as a ballistic missile, but Indian news sources point out that it is a cruise missile, designed to fly close to the surface to its target.
The Sagarika / Dhanush, or Prithvi-III, has a range between 200-350 km, depending on various sources, and has the capability of reaching targets within Pakistan only if deployed in forward bases or from naval platforms. It is able to carry an unspecified nuclear warhead. It is widely regarded to be a response to the Pakistani Ghauri missile program, which has threatened the Indo-Pak balance of power due to the Ghauri's range advantage over the Prithvi.
Indian media has commented on the May 1998 news leak to the New York Times on Sagarika development as a ploy of the Clinton administration to divert the attention of the US Congress from Chinese involvement in the Indo-Pak nuclear arms race. It is unknown how the current US administration will react to the recent successful tests.
Info gathered from www.fas.org, The Hindustan Times (www.hindustantimes.org) and a June 16, 2001 news broadcast by Star News India.