India is the most sexually contradictory place on earth, the most prudish and permissive. There, holy men proudly exhibit elongated penises they've painfully stretched over years by tying them to boulders, and parents take their children to temples full of sculpted figures locked in graphic and gymnastic copulation. Nonetheless, furious protests take place each year against the "western festival" of Valentine's Day, and making a gentle pass at a woman can easily start a riot.

All of these contradictions are manifested in Indian cinema, for which rape, infidelity and romance have been staple storylines since its inception, though showing the merest onscreen kiss has been a taboo. Last week saw the first London screening of Love, Sex Aur Dhoka (Love, Sex and Pain), Bollywood's belated attempt at addressing India's increasing sexual openness. The film caused a kerfuffle in India with its voyeuristic storyline and CCTV footage of a couple writhing on the floor. But that scene, excitedly described on Wikipedia as a "seven-minute long bareback love-making scene" was cut by the censors to a short sequence showing only a woman's blurry, naked back as she wriggles on top of a man.

The primness of Indian cinema is at odds with wider society. Throughout the country, the government routinely puts up huge posters extolling condom use, and ordinary Indians often live with a degree of tolerance that is rare in Britain. Itinerant workers celebrate in their slum when the wife they haven't seen in years writes telling him she's just borne him a son, and many Indian men fondly remember the "aunty" he skipped school to lose his virginity with while her husband was at work.

Why, unlike almost everywhere else, are Indian films much more conservative than reality? Farrukh Dhondy, who wrote the script for Bandit Queen, suggests it is because the cinema has taken the temple's role in society. "India is so disparate that cinema became the national lingua franca and its national religion. People go to the cinema to worship the idols on screen. The characters are icons telling morality tales. There are ravaanas (demons), but they are always defeated.

"Indian cinema isn't novelistic. It does not draw from real life, it only creates myths. Hollywood creates myths, too, but there's a lot of observational stuff there also. In India, films are treated like religion and that's why the stars are so idealised. Like gods in a temple, characters on the screen are treated with reverence."

Dhondy tried breaking the mould when he wrote the movie Split Wide Open in 1999. "It was all about the seamy side of Mumbai life – paedophilia, conniving wives and homosexuality among the upper classes, and whatnot. But the censor cut it awfully, and when the producer complained, saying it ruined the integrity of the film, this sari-wearing Indian woman replied, 'Why are you making a fuss? We have given you three "fucks", what more do you want?' And that was all we were given."

The director Deepa Mehta also tentatively tested boundaries but caused outrage. Her 1996 film Fire caused much harrumphing at its anodyne depiction of middle-class lesbianism, while its sequel, Water (2005), led to rioting. That film only stated the common knowledge that widows dumped at temple refuges are often forced into prostitution. Reactionaries objected to that fact being displayed onscreen far more than the actual practice itself.

"Indians go to the cinema to goggle and worship," says Dhondy. "They don't want the truth." In Britain, no one would screen pornography in a church, but in India, it's the reverse. Explicit sex is on show in the temples, while the movies don't even get to first base.