Etymology
According to Indian tradition, the word was derived from the two meanings of the root rsh. Sanskrit grammarians derive this word from the second root which means (1) "to go, to move" (- Dhātupāṭha of Pānini, xxviii). V. S. Apte gives this particular meaning and derivation, and Monier-Williams also gives the same, with some qualification.
Another form of this root means (2) "to flow, to move near by flowing". (All the meanings and derivations cited above are based upon Sanskrit English Dictionary of Monier-Williams). Monier-Williams also quotes Tārānātha who compiled the great (Sanskrit-to-Sanskrit) dictionary named "ṛṣati jñānena saṃsāra-pāram" (i.e., "one who reaches beyond this mundane world by means of spiritual knowledge").
More than a century ago, Monier-Williams tentatively suggested a derivation from drś "to see". Monier-Wiliams also quotes the Hibernian (Irish) form arsan (a sage, a man old in wisdom) and arrach (old, ancient, aged) as related to rishi. In Sanskrit, forms of the root rish become arsh- in many words, (e.g., arsh. Monier-Williams also conjectures that the root drish (to see) might have given rise to an obsolete root rish meaning "to see".
However, the root has a close Avestan cognate ərəšiš "an ecstatic" (see also Yurodivy, Vates). Yet, the Indo-European dictionary of Julius Pokorny connects the word to a PIE root *h3er-s meaning "rise, protrude", in the sense of "excellent, egregious".
Modern etymological explanations such as by Manfred Mayrhofer in his Etymological Dictionary leave the case open, and do not prefer a connection to ṛṣ "pour, flow" (PIE *h1ers), rather one with German rasen "to be ecstatic, be in a different state of mind" (and perhaps Lithuanian aršus).
Read more about this topic: Rishi
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