In this scene, Parveen's character has been paid/blackmailed to assassinate Shashi's character in some spectacular fashion. You'll have to watch the rest of the movie to find out what happens--but I think the sharp objects on the set really serve to make you feel the dangerous subtext of the song.
If you haven't already seen it, ENJOY! And if you have, I admonish you to enjoy it again. One can't really get tired of a shimmying Parveen Babi virtually painted (but not lethally a la Goldfinger) in gold and sparkles--and surrounded by the same. Also, take note of the large gold-spiked anemone in the middle of the stage. (Why, we don't know. But's RAD/FAB.)