When you think of yellow, what do you think of? Maybe the sun. Maybe butter melting on a stack of fluffy pancakes. Maybe sunflowers. Maybe school buses.
Our point is this: yellow is a pretty dang happy color. If you're feeling depressed in the middle of January, wearing a bright yellow sweater will probably perk you right up. There are very few times in life when the sight of something yellow is going to make you think "Oh deary me," unless you're being chased by a huge, demonic Pac Man.
And when we picture Latika, the first thing that comes to mind is that iconic image of her standing in the bustling train station, her golden yellow clothing shining through the multitudes of people. This image comes from Jamal's viewpoint; this is what he sees when he thinks of Latika. In fact, throughout the film we get it ground into our collective brainpans that yellow = Latika. When we're introduced to Latika as a child, she's wearing yellow—a pale yellow dress.
And because this film is set in India, it's worth noting that the symbolic associations of yellow in India are even—if this is possible—more cheery than in the US of A. In India, yellow is associated with healing (Latika sure heals Jamal's aching heart), holiness (she's definitely pure and good), and the spice turmeric, which is used as a beauty aid (although Latika doesn't need any aid in the beauty department). (Source)
But Latika isn't always decked out in buttercup-hued clothing.
In the middle of the film, when Jamal and Salim find her in the red-light district, she wears a green dress. The color green has associations of nature and new beginning in India—Latika is being outfitted in a pine-colored sari because she's being paraded around as a super valuable virgin. She's being presented as a super-gross manifestation of a "new beginning." (Source)
Yet in this moment she's shrouded in a golden yellow light, a reflection of the way Jamal still sees her.
Later, when Jamal meets Latika in Javed's compound, she is wearing expensive, but colorless clothes. Perhaps this absence of color suggests her loss of passion as a captive of Javed. Yet when she goes to meet Jamal in the train station, Latika is wearing that iconic yellow top, a radiant source of light in the bustling crowd.
The inclusion of this visual motif is no coincidence. As costume designer Suttirat Larlarb explains, the decision to dress Latika in yellow arose from the need to make her stand out in a massive group of people. (Source)
Yellow clothing, y'all: practical, eye-catching, and symbolic of holy healing.