I've only ever been a passenger in Mumbai and India in general (motor rickshaw, taxi, private cars), but the reason for the honking appears to be to magic a path through solid traffic.

It's an experience to be sitting behind the driver in a tuk-tuk going at 30mph straight at a wall of cars 12 feet away when he honks continually, doesn't touch his brakes, and slips though gaps in traffic speeding at 90 degrees without coming any closer then a couple of inches to any of them.