I know this answer is pretty late now, but I have travelled to india a couple of times.
First time I took British cash and travellers cheques. Indian bureacracy has to be seen to be beleived, I spent hours in a queue to have some jobsworthy person fill out upteem forms and stamp umpteen forms and papers before I got my cash and I wish I hadn't bothered.
More recently I took about �50 cash and 1 credit card for a 10 day holiday and this was fine. On the whole everything is very cheap, and even cheaper when you haggle.I only used my crdit card for paying for hotel and some gifts in a deluxe leather shop selling designer things. Everything else was so cheap including meals, massages, manicures, market shopping, etc I found small denomination ruppees are best.
Enjoy!