Have you lived there? It's not that expensive. Primary costs would be rentals. And they fall exponentially as you move away from Nariman Point (city center)

Depends on your lifestyle. You can live comfortably with a small amount, but if you have personal preferences (like having a smartphone, Macbook air, skiing in winter, and a good car) the location won't really matter much.

That's a little more than 2.5 lakhs a month. There is no part of India where you can't live comfortably in that much money.

Bear in mind that living in Mumbai doesn't mean living in Pali Hill. The suburbs are significantly cheaper.