When Penguin abruptly accepted defeat in an Indian court and withdrew a controversial book a fortnight ago, the backlash was so ferocious it took almost everyone by surprise.

A small, hardline Hindu group said it had found the book, The Hindus: An Alternative History, by the academic Wendy Doniger offensive towards their religion, forcing the mighty conglomerate to retreat in the face of a lawsuit. Two authors subsequently asked the publisher to cancel contracts and pulp their books, too, a move called "unprecedented" by one Indian newspaper.

Other famous writers in its stable protested at Penguin, including the activist Arundhati Roy, who accused it of succumbing to "fascists". On Twitter, images of the Penguin logo circulated with its name replaced by "Chicken".

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In the same week, the United States ended its decade-long boycott of the controversial politician Narendra Modi after its envoy met him to discuss bilateral relations. Modi is the Prime Ministerial candidate of the opposition party, the BJP, and favourite to win the elections in April. The State Department had cancelled his visa in 2005 on grounds of "severe violations of religious freedom" and had repeatedly refused to review its policy until pragmatism forced it hand.

The withdrawal of Doniger's book and the US rapprochement with Modi are not unrelated. Liberals in India say they feel under attack and more despondent than ever before about the right to expression as religious groups increasingly flex their muscles. Many fear that Hindu nationalists will be further emboldened if Modi, their most demagogic leader, is elected prime minister.

The fact that it is 25 years to the month since Salman Rushdie received a fatwa for The Satanic Verses has not been lost on some. "We are in the middle of a cultural emergency and the levels of oppression in the cultural area should worry us as much as the political oppression [in India] of the 1970s," Rushdie said at a debate last week. A columnist at the Indian Express newspaper said Penguin's capitulation represented "the pulping of liberal India".

Just a week earlier, a mob calling itself the Hindu Sena (Hindu Army) burnt copies of Caravan, the Delhi-based magazine, over an interview with a Hindu extremist who alleged that a prominent religious leader had sanctioned attacks across India that killed more than 100 people between 2006 and 2008. "Groups of all stripes have been emboldened by the fact that, in India, freedom to take offence routinely trumps freedom of expression or freedom of academic research," Sandip Roy, a senior editor at FirstPost.com, says.

"Whether it's Bangladeshi writer Taslima Nasrin being hounded out of West Bengal, Salman Rushdie not being allowed to make a tele-appearance at Jaipur, or Rohinton Mistry's Such a Long Journey being taken out of the Mumbai university syllabus, India's political parties have routinely allowed fringe groups to grab the limelight. If they feel the party in power is more ideologically sympathetic to it, of course it will feel as Dinanath Batra [the man behind the lawsuit against Doniger] did, that 'the good times are coming'."

Hindus don't have a reputation for religious extremism, but over the past 25 years an increasingly aggressive movement has grown and started flexing its muscles. The list of authors who have faced ruinous lawsuits, had books banned or lives threatened in India is growing alarmingly long. (Not all of the bans relate to Hindu groups; Muslims and Christians have demanded censorship, too.)

It is also less understood that the rise of this movement in India has been partly fuelled by activists in the UK and US, who in turn have pushed similar agendas. If Modi is voted in as prime minister, there are fears that his election would have repercussions not only in India but abroad, too.

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Hindu fundamentalism, also called Hindutva, is driven by a trio of organisations in India called the Sangh Parivar – the family. The RSS is an ultra-conservative group that demands unflinching patriotism and preservation of Hindu culture; the VHP is their religious arm; the BJP is the political arm and India's main opposition party. There are smaller offshoots too including a violent paramilitary wing called the Bajrang Dal and the hardline Shiv Sena party in Mumbai whose founder adored Hitler.

"Hindu nationalism is built on the idea that India is a Hindu majoritarian nation, with Muslims and Christians cast as the minority, 'other'," Rahul Verma, a journalist and researcher on the subject, says. He says Hindu nationalism in recent years has fed off the Islamophobic, post-9/11 "Muslim terrorist" narrative.

Chetan Bhatt, the director at the Centre for the Study of Human Rights at the London School of Economics, has also spent years studying this movement. "Narendra Modi has been an activist for the Hindu far-right paramilitary RSS and its affiliates for the entirety of his political life. He remains committed to the supremacist ideology of Hindutva which says that India should be an exclusive Hindu nation state in which minorities are treated as second-class citizens or worse."

The movement mushroomed in 1984 when the VHP launched a campaign to reclaim a mosque it said was built on the birthplace of Lord Ram. In 1992, it incited activists to demolish the mosque, sparking riots between Hindus and Muslims across India and propelling the BJP, which took advantage of the controversy, into national consciousness and into government in 1998.

But Narendra Modi became a controversial figure in 2002, when a train with Hindu pilgrims coming from the site of the mosque was set on fire by Muslims, killing 58. That incident immediately sparked riots across the state of Gujarat, where he was still Chief Minister, and more than 2,000 Muslims were killed and thousands made homeless. Reports by various groups including Human Rights Watch found extensive evidence of state participation and complicity in the violence. One of Modi's cabinet ministers, Maya Kodnani, was convicted of orchestrating a massacre and seen handing out swords to Hindus exhorting them to kill Muslims.

A large part of Modi's popularity abroad comes from his message that Gujarat can be a beacon for India's economic development. This Gujarati pride resonates strongly in the UK and United States, where large proportions of Indians are of Gujarati origin. In December 2002, an investigation by Channel 4 News found that some funds from a UK-based aid organisation were going to Hindu groups blamed for the 2002 riots in India. Channel 4's Jonathan Miller reported: "Several inquiries, including one by the British High Commission, saw the hand of the RSS and its associated organisations behind the violence."

Earlier that year, a US campaign called Stop Funding Hate published a report alleging that an American non-profit group was linked to Hindu nationalists in India and had funnelled money to them. Two years later, a report by a British group called Awaaz also illustrated how some British Hindu charities had sent money to extremist organisations in India that preached hatred against Muslims and Christians. The reports were partly the basis for ban on Modi entering Britain or the US.

British and American Hindus are an important source of support, canvassing and even postal votes for the BJP in India. More recently, they have helped to normalise Modi's reputation after the fallout from 2002. On Sunday afternoon, about 20 Gujaratis gathered at the back of a small restaurant in north-west London to discuss how they could help Modi spread his message. I had been told about it by a friend and decided simply to turn up and observe.

At their regular "Modi Tea Club" events, they raise funds and recruit volunteers. One group member, who is planning to run as a local councillor, applauded the US decision to meet Modi and said British Gujaratis had played an instrumental part. "The pressure we put [on the government] in the UK makes a difference around the world," he says, to applause. Next month, their idol will speak to them and hundreds of other groups around the world via satellite to energise them before the elections.

The British Government ended its boycott in October, though a visa is yet to be granted. Among Modi's ardent supporters are the Tory MP Bob Blackman and Labour MP Barry Gardiner, both of whom have large numbers of Hindu-Gujarati constituents. Kamaljeet Jandu, chair of Labour's Black, Asian and Minority Ethnic society, says he was dismayed when Gardiner invited Modi and accuses him of attempting to "whitewash" his past. "Inviting Modi here sends out a dangerous signal that the UK does not care about human rights or religious minorities in India when it doesn't suit us," he says.

The US government faced sustained lobbying in favour of Modi, particularly from the Hindu American Foundation. But he has another ally: the Asian American Hotel Owners Association, which has 10,000 members representing 22,000 hotels across America, 98 per cent of whom have roots in Gujarat.

Zahir Janmohamed, a former US Congressional aide and Amnesty director who was part of coalition to keep Modi out, says: "The Obama administration wanted to meet at the 11th hour so Modi couldn't campaign on the issue." The ban in 2005 was "an effort to stop Modi", he says, but "they've realised they can't stop him now". The coalition focused too much on keeping him out and not enough on India's broader slide towards illiberalism, he says.

A former US State department official, who was willing to comment under condition of anonymity, says the US is in a difficult position. "It becomes harder to not deal with certain leaders as they move higher up their domestic political ladder, so a meeting in India seems to be a middle-of-the-road option. But you can be sure the various groups in the US opposed to normal relations with Modi will not back down. If anything, they will be energised."

This is partly because there are fears of repercussions. "A Modi win in India would undoubtedly strengthen intolerant Hinduism here," Gita Sahgal, a veteran campaigner with Southall Black Sisters who is also the director of the Centre for Secular Space, says. "There will certainly be increased threats to scholarship, and free expression."

Not long after the 9/11 terrorist attacks, Hindu and Sikh groups, including the VHP some say, campaigned for Asian radio stations in London to drop the word "Asian" so Hindus and Sikhs would not be lumped together with Muslims. An umbrella group called the Hindu Forum of Britain, earlier led by the VHP and the HSS, has campaigned against exhibitions and even Royal Mail stamps for supposedly insulting Hindus. Its former general-secretary, Ramesh Kallidai, also alleged that British Muslims were "aggressively" converting hundreds of British Hindu girls to Islam through intimidation and beatings, even though no such evidence was found by the Metropolitan Police.

"It's imperative to mobilise against the Hindutva organisations in Britain," Sahgal says. "All Indian political parties have played communal politics and fallen short of their ideals but religious and gender inequality is at the heart of the Hindu right agenda."

That agenda could become mainstream if Modi's likely victory strengthens such groups in India and the UK. Twenty-five years on from Rushdie's fatwa, it is paradoxical that some Hindu groups are pushing an ancient religion towards a mirror image of the same hardline Muslim groups that they say they are against. The withdrawal of Wendy Doniger's book was a small milestone in what they hope will be that "pulping of liberal India". Tragically, for those of us who believe in liberal, secular values and pluralism, these events may herald an even more terrifying future.