Pondicherry has small boutiques, local markets, and Ashram shops. Many are located on Nehru Street and Mahatma Gandhi Road. Specialty products include homemade paper and paper mache products (especially dolls), arts & crafts/handicrafts, terracotta/fine pottery.
Two places I shopped:
Splendour: located at 16 Goubert Ave (north from Gandhi statue) is one of the sales outlets for Ashram products. We bought a really nice Ganesha sculpture (at least half the price of what it would cost in Mumbai), some pottery, and a few smaller items. Open Thurs-Tues from 9:30 a.m. to 1:00 p.m. and 4:00 p.m. to 8:30 p.m. 413/233-6398
The Boutiques at Auroville: Fanstastic assortment of products in the multiple boutiques at Auroville. High quality products - paper mache, clothing, aromatics, etc., etc. There are outlets in Pondicherry as well; although we did not shop in them, I'm sure they'll have the same items as they do at Auroville.
What to buy: Homemade paper and paper mache products (especially dolls), arts & crafts/handicrafts, terracotta/fine pottery.
After traveling through the South of India for a little while, it was a sight that pleased our eyes. This is a well stocked supermarket that caters for those self-catering or those like us who have been missing things including diet coke.
Has air conditioning, good to wander in if you are getting too hot!
You should be sure to visit the Sunday market in Pondi. The streets are so alive with vendors selling everything imaginable under the sun. Everything is set up on the sidewalks and it can be pretty hot during the summer so be prepared to walk in the heat!
What to buy: The market is perfect for finding cheap clothing like sarees and punjabis, scarfs, metal plates, cups, pots, shoes, anything!
What to pay: Items at this market are generally much cheaper than you will find in any store so be sure to bargain.
Most of the arts and crafts available in India (and definitely near touristy areas) are based on old styles and designs. Modern art isn't all that common or easy to find. There are a few places, though, like Auro Wood Works, where the owner is willing to experiment. Some of the results are interesting, following the contours of the wood to become faces or gods.
What to pay: Costs range widely. The smallest piece I saw was about 1200 rupees, up to 8000 rupees for a large balancing sculpture.