A Fine Balance is set in India in the mid-1970s. It tells how the lives of four ordinary people are overturned by the Emergency, a period of political turmoil and violence.

Initially the book focuses on Dina Shroff, who was raised by her strict brother after her father died. To avoid her brother’s rages, Dina spends as much time as possible wandering in parks, libraries and markets. She discovers a series of concerts, where she meets Rustom Dalal. The couple fall in love and marry, but on their third wedding anniversary Rustom is killed in a bicycle accident, leaving Dina alone.

Rustom’s aunt teaches Dina to sew, but her eyesight begins to fail, so she is forced to find another way to make money. Her friend Zenobia introduces her to Mrs Gupta, who offers her some tailoring piece work. She hires Ishvar Darji and his nephew Omprakash, originally from a small village, to do the work.

Ishvar’s father was of a low Hindu caste, doing dirty leather work, and he suffered horrendous caste violence. He wanted a better life for his sons and so sent them to a neighbouring town to learn to be tailors.  They became the apprentices of Muslim tailor Ashraf. But when Ishvar was seventeen, racial hatred of Muslims reached boiling point and any homes or shops belonging to Muslims were burnt to the ground. Ishvar and his brother Narayan saved Ashraf’s shop by claiming it belonged to them, leaving Ashraf forever in their debt.

Narayan returned to the village and set up a successful tailor business for lower caste people, refusing to serve those of higher caste. He married and had a son, Omprakash, and two daughters. His business was very successful and it gave him enough money to build a proper house.  All was going well until Narayan discovered that the elections were being fixed by Thakur Dharamsi, a powerful land owner.  Narayan confronted Thakur, who had him tortured. Not satisfied with just killing Narayan, Thakur decided to punish his whole family. Narayan’s wife, daughters and parents were tied up and burnt alive in their home. Omprakesh and Ishvar were the only ones to escape. Shocked but safe, they continued working in their tailor shop, but were forced out of business when a ready-made clothing shop opened in the town.

The fourth central character is Maneck. He grew up in a mountain village, where his father was the proud owner of the local village store and inventor of a popular drink, Kohlah Cola. Maneck was sent to college and became good friends with the student president, Avinash. Their living conditions were terrible: the rooms infested with cockroaches and the food almost inedible. Avinash led an uprising against the conditions and became involved in politics. When the Emergency was declared, Avinash had to go into hiding, leaving Maneck alone. His mother then arranged for him to move in with Dina Dalal, bringing the four central characters together.

The four are quite happy for almost a year, but then the Emergency starts to impact their lives. The tailor’s shack is demolished in a government beautification program, forcing them to live on the streets. The tailors are then rounded up by the police and sold to a labour camp. After two months they bribe their way out and persuade Dina to let them move in with her.

Ishvar decides it is time for Om to find a wife, so they return to Ashraf's town. There they bump into Thakur, who recognises the pair. He arranges for them to be rounded up by the Family Planning Centre. Ashraf is beaten to death and Ishvar and Om are given compulsory vasectomies. Thakur visits them as they are recovering from the operation and arranges on a medical pretext to have Om's testicles removed. Ishvar’s legs become infected and have to be amputated.

Maneck finishes his college course and returns home. His father’s business is failing due to cheap imports of commercial soda, and Maneck decides to leave, taking a job in the Middle East.

Dina finds herself all alone. A Beggarmaster who had been protecting her from her landlord's bailiffs is murdered, leaving her vulnerable; she reluctantly returns to live with her brother.

Eight years later, Maneck returns home for his father’s funeral. Riots are taking place and Sikhs are being persecuted because the Prime Minister was assassinated by one of her Sikh bodyguards. Maneck reads some old newspapers and discovers that Avinash was found dead by the side of a railway track and Avinash’s three teenage sisters hanged themselves because their parents could not afford their wedding dowries.

Distraught, Maneck decides to visit Dina. She explains that Ishvar lost his legs and that the tailors are now beggars. Horrified, Maneck leaves Dina’s house, pretending not to recognize the tailors in the street, and heads for the railway station where he steps in front of a train.

The book ends with the tailors having an up-beat conversation with Dina. Despite their problems they seem to be happy.