The story begins in a city in the country of Alfibay that is so sad it's forgotten its name. It stands by the sea and in its factories it manufactures sadness. A young boy named Haroun lives there with his mother, Soraya Khalifa, who loves to sing, and his father, Rashid Khalifa. Rashid is a storyteller, known by his admirers as the “Ocean of Notions” and by his rivals as the “Shah of Blah.” Haroun's upbringing was uncharacteristically happy, until the day Haroun's mother stopped singing. Rashid is so busy telling stories, he doesn't notice that Soraya has stopped singing.
The first question the novel offers for consideration is, essentially, what is the importance of a name, and what does it mean when you forget a name? This question is underscored by the fact that Rushdie liberally uses capitalization to denote importance in even common nouns, and the sad city is only ever written in lowercase. The city is so sad, it can't even use a grammatical convention to refer to itself. We’re also immediately introduced to the frequent wordplay of the book with Rashid’s rhyming nicknames and “Alfibay,” a play on the Hindustani word for alphabet.
Haroun accompanies his father to his performances every chance he gets, in awe of Rashid's talent. Haroun thinks of his father as a juggler of stories. Haroun, however, wants to know where all these fantastic stories come from, but whenever he asks his father about it, Rashid replies with a straight face that they come from the warm waters of the Story Sea, piped into the house through an invisible tap installed by a Water Genie. This answer irritates Haroun, as he's never seen a Water Genie. When he tells Rashid this, Rashid replies that Haroun must stop "Iffing and Butting" and enjoy the stories.
Haroun both admires his father's stories and is exasperated by them, as what he really wants in this situation is concrete answers rather than fantasy. The "Iff and Butt" motif, as well as the rest of Rashid's story, will reappear later, as all of what happens in Haroun's life in Alfibay provides the inspiration for the dream journey he'll take later.
The Khalifas live in a downstairs apartment of a house that is colored like a cake, and they are solidly middle class. People in the sad city mostly have big families, but Haroun is an only child, and wants to know why. Rashid tells Haroun, "there's more to you, young Haroun Khalifa, than meets the blinking eye," which Haroun takes as no real answer. Soraya answers that they tried to have more children but were unable to, and tells Haroun to think of the poor childless Sengupta family that lives upstairs. Mr. Sengupta is a clerk and is whiny and “mingy” (mean and stingy), while Oneeta Sengupta is fat and dotes on Haroun.
Rashid's statement that there's more to Haroun than meets the eye leads the reader as well as Haroun to file this away as something important for later. In the discussion of the Senguptas, the reader is asked to consider two very opposite people in Mr. Sengupta and Rashid, as well as wonder what might be a happy medium between the two. From the very beginning, Mr. Sengupta is set up as an unlikeable character to watch out for going forward.
Mr. Sengupta always talks to Soraya when Rashid isn't around, criticizing Rashid and his stories, insisting that there's no use in stories that aren't true. Haroun, eavesdropping from outside, decides that he doesn't like Mr. Sengupta, but he can't get the question "what's the use of stories that aren't even true?" out of his head.
This question of the use of stories can be considered the thesis of the novel. Here, it's used to discredit and cast aspersions at Rashid and his profession, offering for consideration the possibility that stories aren't useful.
In spite of Mr. Sengupta's disdain for stories, Rashid is in high demand with politicos (politicians) running for office, as it's an election year in Alfibay. Everyone has complete faith in Rashid because he's upfront that his stories are totally made up, but nobody believes the politicos, meaning that they need Rashid's help to win over the voters. Rashid can pick and choose which candidate he'd like to support, as they all want him to tell their stories.
Here we see that regardless of Mr. Sengupta's feelings, there are people out there who understand the power of stories and are willing to pay for them. This idea links stories with power, as Rashid essentially has the power to make an election swing in whichever way he chooses.
On the day everything went wrong, it was the first day of the rainy season in the sad city, and Haroun took his time walking home from school to play in the downpour. Upon arriving at his house, he sees Miss Oneeta standing and shaking on her balcony, although he can't tell she's crying because of the rain. When he enters his house, Rashid is crying too. It’s revealed that Soraya ran off with Mr. Sengupta at precisely 11:00 am. She sent Rashid on a mission to Haroun's bedroom and while Rashid was occupied, sped away in a taxi. Rashid, noticing that the clock still stood at 11:00, smashed the clock with a hammer, and then went on to smash all the other clocks in the house. Upon finding out about his mother's departure, Haroun's first words were to ask his father why he'd smashed Haroun's clock.
The idea of time, specifically stopping it, becomes a way to explore balance. Once Haroun's life is out of balance due to Soraya's departure, time for Haroun stops, and Rashid will suffer the fate of losing his storytelling skills in his sadness. Soraya leaving at 11:00 and the motif of 11 minutes begins to allude to the 1001 Arabian Nights, which will become a more concrete motif later.
Soraya left a note for Rashid filled with nasty things about him and about storytelling. Rashid pathetically cries that storytelling is all he knows, and Haroun loses his temper and shouts, "What's the use of stories that aren't even true?" These words haunt Haroun, and he blames himself when not long after, Rashid stands up in front of an audience, opens his mouth, and has no stories to tell.
Here, a combination of sadness and questioning the importance of stories leads to stories disappearing. Rashid, like his city, becomes so sad he loses some of what defines him. Further, we are introduced to Haroun's sense of responsibility and duty to his father, which will guide him going forward.
After Soraya leaves, Haroun finds that he can't keep his attention on something for more than 11 minutes at a time, creating many difficulties in his life. Miss Oneeta realizes the source of the trouble, saying that 11:00 is when Soraya left, and Oneeta says that Haroun's psychological sadness means that he's stuck on 11 and can't get to 12. Haroun fears that this is true, and he wonders if the problem could be resolved if Soraya came back and started the clocks again.
Again, Haroun senses the need for balance to be achieved before time can move again, and balance to him means having both parents present. Until some form of equilibrium is reached, Haroun is essentially stuck in time.
Several days later, Rashid is invited by politicos to perform in the Town of G and the Valley of K. In an aside, the narrator notes that in Alfibay, many places are named after a letter in the alphabet, and since there are a limited number of letters, it causes much confusion and makes for excitable mail service employees. Rashid insists that he and Haroun go, since the weather is still nice in the Town of G and the Valley of K, while the rain in the sad city persists.
Remember that Alfibay comes from a Hindustani word meaning "alphabet." The fact that places in Alfibay are only identified by letters, and share their names with other places rather than having truly unique names creates a sense of absurdity, and also emphasizes the importance of language and naming to a sense of identity.
On the train, Rashid tells Haroun about the wonders of the Valley of K, particularly the beauty of the Dull Lake. Haroun stops listening after 11 minutes and Rashid stops talking too. They're met at the train station in the Town of G by two of the politico's henchmen, both with large moustaches, whom Haroun thinks look like villains. Rashid gets up on stage in front of the crowd to tell his story, opens his mouth, and all that comes out is, "ark, ark, ark."
Here, names again are used to develop a sense of absurdity with the implication that the Dull Lake is anything but dull. Notice that Haroun is characterizing people with broad strokes—there's not a lot of nuance to his assessment of the henchmen, which creates room for him to develop some of that nuance over the course of the novel. Rashid’s power—his storytelling ability—has been stifled by his sadness, effectively censoring him into absurdity.
Haroun and Rashid are shut in a hot office while the two large men yell at Rashid, suggesting that they'll cut off his tongue. Rashid tries to assure them that he will be magnificent in the Valley of K. Haroun, trying to diffuse the situation, asks when the plane leaves, and the men yell that Haroun and Rashid will have to take a bus. Haroun feels like it's all his fault and thinks again of the question, "what's the use of stories that aren't even true?" He feels he has to do something, but doesn't know what.
Despite the stereotyping, Haroun wasn't far off in his assessment of the henchmen. This idea comes into play more as the novel begins to explore what qualities make up a “villain.” We also see again that Haroun is taking on a great deal of responsibility for the course of events, despite only trying to help and make sense of the situation.