The novel opens with a prologue that introduces Abdul, a garbage sorter in the Mumbai slum of Annawadi. Abdul is hiding in his family’s garbage shed, afraid of being arrested for setting his neighbor Fatima on fire, despite that he is innocent and has tried as hard as possible to stay out of trouble all his life. The novel then skips backward to January of 2008, seven months before the burning. Abdul, the Husain family’s oldest son (who is sixteen or seventeen), sorts recyclables to sell to recycling plants, which helps his parents Karam and Zehrunisa provide for their family of thirteen. Because Abdul works so hard, his younger brother Mirchi can continue his education. Mirchi dreams of a clean job working as a waiter in a hotel, though he knows that Muslims like himself still face discrimination, and that could limit his opportunities.
Another slum resident, Asha, also dreams of making it big. She wants to be the first female slumlord of Annawadi, fixing issues for the powerful Shiv Sena party and taking advantage of government anti-poverty programs to make money. Asha does nothing without profit in mind, including sending her daughter, Manju, to college so that Manju will be able to improve their family’s situation even more. Manju does not approve of Asha’s corrupt dealings, but Asha sees corruption as the only way for the poor in India to get ahead. Another young boy in Annawadi, Sunil, knows just how few options there are for the poor. He scavenges all day for trash to sell to Abdul, mainly looking along a concrete wall at the airport that is covered in advertisements for ceramic tiles that will stay “beautiful forever.” The purpose of this wall is to hide Annawadi from the airport’s rich international passengers. Sunil rarely finds enough trash at the airport to have money to eat properly. His growth has been stunted by lack of nutrition, and he tries to use his appearance to his benefit and gain pity from the security officers at the airport, but it rarely works.
The conglomerate that owns the land on which Annawadi has been built is constantly threatening to demolish the slum to make more room for airport construction. Mumbai city officials approve the plan, hoping to show that impoverished slums are a thing of the past in India. Boys like Abdul and Sunil understand that they, the poor, are hated in the city, though they try to get by with their dignity intact. Other boys, like the charming young Kalu, become addicted to drugs and survive on theft. Everyone in Annawadi loves Kalu because he has a good sense of humor despite his hard life. Meanwhile, Manju is the “most everything” girl in Annawadi—kind, beautiful, smart, and obedient. She genuinely believes that education can make a difference in the lives of the poor girls of Annawadi, though her mother has a more cynical attitude; Asha runs a school in the slum just to appear charitable. Manju dedicates herself to her studies and helps Asha with Shiv Sena business whenever asked, sacrificing sleep and leisure time to do all her chores in her rare free time. Manju comforts herself that she at least has more freedom than Meena, her best friend in Annawadi who lives completely controlled by her father and brothers.
Fatima, disdainfully called “One Leg” due to a birth defect that twisted one of her legs, also rebels against the confines of her life. Forced to marry a Muslim man and move to Mumbai from a rural village, Fatima flaunts her extra-marital affairs to give herself a sense of self-worth. Zehrunisa (Abdul’s mother) does not approve of her next-door neighbor Fatima, becoming especially concerned when Fatima’s youngest daughter drowns and Fatima seems not to grieve. Despite Zehrunisa’s disapproval, the two families are still forced together as the only Muslims in this part of Annawadi.
Karam (Abdul’s father) looks forward to one day moving his family out of Annawadi to a Muslim suburb called Vasai, but Zehrunisa would rather use their limited savings to improve their current house in Annawadi. Zehrunisa wins, and Abdul tries to install shelves into the brick wall that the Husain house and Fatima’s house share. Fatima becomes alarmed at the construction and insults the Husain family for daring to rub their wealth in her face. After Zehrunisa shouts a few insults back at Fatima, Karam and Kehkashan, the oldest Husain daughter, get into a shouting match with Fatima that ends in Karam ordering Abdul to beat Fatima. Abdul does not, and Fatima storms into her house. When Fatima’s daughter Noori returns home for dinner, she finds her mother pouring kerosene on herself. Fatima sets herself on fire, and accuses the Husains of pushing her into burning herself—a criminal offense in India.
Fatima is rushed to the public hospital, while Karam is arrested and Abdul goes into hiding. Yet Abdul is too honest to stay a fugitive and he turns himself in. Their time in the police station is a horrific experience of beatings, starvation, and desperation that only gets worse when Fatima dies. Now accused of murder, the Husains face extortion from the police, from Asha, from the hospital, and from the special executive officer assigned to their case. Zehrunisa bribes a police man into trying Abdul as a minor, so Abdul is sent to a juvenile detention center called Dongri. At Dongri, Abdul becomes a student of a man called The Master whose moral teachings affect Abdul profoundly—Abdul now aspires to be one of the few truly virtuous slum residents.
That July, Asha hopes to arrange a marriage for Manju that will pull their family out of the slum and into the middle class. She forces Manju to give less time to volunteering at the slum school and more time to mingling with the middle-class students in her college classes, but Manju still feels like an outsider. Manju is especially traumatized when she finds out that Asha sleeps with politicians and policemen for money and power, but she can do nothing about the situation. Meanwhile, Sunil decides to become a thief to avoid the sad disease-ridden death that awaits most scavengers, and he becomes Kalu’s partner in theft. While Abdul, (who has been released from Dongri until his trial), advises Sunil to stay on the right side of the law, Sunil continues stealing until Kalu is found murdered on airport grounds. Kalu’s death sets off the boys of Annawadi with grief and panic. They know that no officials will care about the murder of a slum boy—they recorded Kalu’s cause of death as tuberculosis—and one of Kalu’s friends, Sanjay, is so shattered by the murder that he commits suicide by eating rat poison. Sunil and Abdul bond in their mourning, becoming friends.
In late September, Asha focuses on planning a legendary party for Navrati, a holiday celebrated by nine nights of dancing—the only time that most girls in Mumbai are allowed to dance and flirt. The women of Annawadi desperately need a release, since many have taken Fatima’s suicide as a symbol of all the pressure and pain of being a wife and mother in this constrained environment. Meena and Manju also feel this tension in the air, even secretly discussing the best methods for committing suicide if that becomes necessary in their imminent arranged marriages. The first day of Navrati, Meena finally cracks under the constant abuse of her family and swallows a tube of rat poison herself. Manju tries to save Meena, but she dies six days later.
By November, the global economic crisis has ruined most people’s ability to earn an income from scavenging, and terrorist attacks ruin the normal tourism industry in Mumbai. The residents of Annawadi are poorer than ever. By January, Sunil can only make money by stealing from the construction sites at the airport. It’s a risky business, but it lets him make a living by selling metal to Abdul. Abdul, going back on his promise not to trade stolen goods, muses that even a terrible life is still a life in these harsh circumstances.
Karam and Kehkashan’s murder trial (Abdul, a minor, is being tried separately) finally begins in one of India’s fast-track courts, where judges have little time to even hear all the evidence in the hundreds of cases they hear each month. Karam advises his family to trust in justice, despite knowing that justice in India depends on who can pay the most. Luckily, the witnesses called to testify about what happened the day that Fatima burned herself tell the truth that Fatima did this alone. Only Fatima’s husband and her best friend Cynthia continue to say that the Husains burned Fatima. Yet just when it seems that the judge will pronounce the Husains not guilty, a new judge is appointed to the case and evidence must be given again.
In the larger news of Mumbai, the Annawadians are in a frenzy over the upcoming parliamentary election and the chance to choose a new prime minister who will enact real change for India’s poor. Yet most Annawadians are not able to register to vote because the government still does not count the low-caste or the poor as real citizens when they live in slums. The election passes with the previous prime minister re-elected. The only real change is that plans to destroy Annawadi move forward. Anyone who can prove that they have lived in the slum since 2000 are entitled to an apartment with running water, but Asha fixes contracts with rich politicians to give most of those apartments to middle-class residents of Mumbai who don’t live in Annawadi. She becomes hated in Annawadi, but she no longer cares what the poor think of her since she now considers herself to be a member of the middle class.
In June of 2009, the judge finally pronounces Karam and Kehkashan not guilty, but Abdul’s case in the minor court drags on through 2009 and 2010. Abdul learns to live with not knowing the verdict yet, working hard to provide for his family again though he laments that he has had to become corrupt to survive in this unfair world. Still, boys like Sunil have hope for a better future for those in Annawadi.