Exactly one year ago I left India. It might seem silly (what's the big deal of leaving a country in which you've only lived for just one year?), but for me it was quite tough.
Saying that haggling is the usual way of doing business in India would be a euphemism. I think Indians learn this word before they learn to say mommy or daddy!
In India each and every deal is negotiable: food, clothes, taxi fare, dowry,... the list has no end! You must work out a deal at the butcher's, at the fismonger's, at the bakery,... everywhere!
The first sale of the day is considered to bring good luck, so it's the right moment to get a good price!
But the real paltering takes place at souvenir shops.
A piece of advice: never, ever show that you are interested in something! Pretend to be indifferent; it doesn't matter how much you want it! If they see the teeny tiniest enthusiasm in you, you're screwed up!
The game begins when you ask "how much is it?" They start off with an astronomical price, and that is in deference to us, foreigners! They think we are all filthy rich!
At the very beginning, I have to admit that I was fooled. I paid 275 rupees for a churidar. If I had bought it two weeks later, when I was more experienced, I'd have only spent 100. When my mom came to visit me, I wanted her to try a vegetable which we cannot find in Spain (if I remember well, it's called bitter gourd). I paid for a pound of it the same amount of money my friend spent on veggies for fifty people in a week!
But then I learnt! Whenever I went to a tourist site, I was asked exorbitant prices for simple knick-knacks. Then I pointed at my clothes, my mehndi and my anklets and said, "But can't you see that I am already half Indian? You have to charge me what you'd charge an Indian!" I know for sure I paid more than the local folks, but I got to lower the price by at least 80%!
Although bartering can be awkward for most foreigners, you have to find the bright side: you can have free tea! Salesmen offer tea to posible customers, so you just have to display some enthusiasm and... voilà... free chai (which is delicious, by the way)!
Another way of taking advantage of eager shopkeepers is getting to know the place with the inestimable auto drivers' tourist guidance. They get a meal coupon or a petrol voucher for taking clients-to-be into some shops. That is what I did in Delhi. I saw part of the city in an auto (all by myself, not with 18 people more), I had some free chai, I went shopping (which I love) and (why not confess it?) bought some stuff (mind you, real bargains!).