I haven't been to India in ages. I would recommend visiting a travel website for more information. Get destination-specific tips from people who have been there recently.
Talk to your ped about vaccines. I'm a vaxer and I haven't taken my kids there (yet!) so I can't comment.
Yes, there are pickpockets and you are more of a target with a small child in tow. There are all these classic tips like throwing mud on your shoes and offering to clean it up (for a price). I took out kleenex and wiped my sandals off in front of them!
Bottled water is not a problem if you buy it sealed. Most of the bigger hotels have their own treatment plants so the water is safe but I stayed in mom & pop places. I used bottled water to brush my teeth. I was also told to not buy melons or citrus fruit from stands because they inject them with water to make them heavier. The water might be from the tap.
I never got sick and I used to go there for work, as well as making a trip on my own, with coworkers. I love India! But you do have to be aware of a few issues. I ordered all food piping hot. I sent it back when it wasn't. They really don't mind. Indian customer service is very good and they are more than happy to accommodate your requests, including for your child. I stuck to vegetarian the whole time, which is not limiting at all. And avoided salads, except in a fancy, western-oriented hotel.
Just as an amusing story, two coworkers (a couple) went there and the husband had terrible stomach pains. They gave him a pain killer and they had to go home. What exotic disease did he have?? Kidney stones! Something he would have had if he had never left!!! Luckily, while painful, they're not life-threatening but his imagination was going wild!
So remember that travel in general can expose your child to bugs. Don't blame it on India!
Here are my flying with children tips. There are a lot of them on the net but most are written by parents who have flown a few times and consider themselves "experts". I was a Flight Attendant for 13 years and fly between Europe and California twice a year, plus other flights (usually alone).
http://flyingwithchildren.blogspot.com
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