I use shell inside emacs but by default it prints output in 1 color.
However, when I use grep, I would like to see substring I'm searching highlighted.
To see colors, I can manually type TERM=ansi when shell starts, but I wonder if there is a way to run shell with TERM defined?
Presumably you are using bash? If you add TERM=ansi to your .bashrc all interactive non-login shells that are opened will have it set (including emacs).
Otherwise if You only want that set in emacs you can create a file ~/.emacd.d/init_bash.sh (replacing "bash" with your default shell if not bash) containing TERM=ansi.
From the shell docstring (C-h f shell):
If a file ‘~/.emacs_SHELLNAME’ exists, or ‘~/.emacs.d/init_SHELLNAME.sh’, it is given as initial input...
