By Rohinton Mistry

Knopf. 434 pp. $26

The title of Rohinton Mistry's wonderful third novel can be read both ways: It concerns family matters, and it is founded on the essential premise that families matter.

The family in question is an extended one: a grandfather, Nariman Vakeel, suffering at 79 from Parkinson's disease and a broken ankle that will not set; his unmarried middle-aged stepchildren, Jal and Coomy Contractor, who share his Bombay apartment but do not wish to care for him; and his married daughter, Roxana, her sales-clerk husband, Yezad Chenoy, and their young sons, upon whom the onus of nursing the old man falls. What happens after Nariman's stepchildren dump him on the Chenoys is the subject of this acutely observed and deeply compassionate book.

A bald summary of the novel's plot cannot do justice to the richness of its portrait of middle-class life among the tiny Parsi community of Bombay, the descendants of Zoroastrians who fled Muslim persecution in Persia more than a millennium ago and whose impact on India has long been disproportionate to their dwindling numbers. Mistry, a Bombay Parsi himself, has made his home in Canada but sets each of his novels in an India he evokes with meticulous and loving detail. As Nariman's health deteriorates and he lies in the Chenoys' living room enduring pain and incontinence, every odor and excretion is unsparingly described. But so, too, is the old man's past, as he recalls the love of his life, Lucy Braganza -- a Christian whom his parents did not permit him to marry -- and his loveless marriage to Jal and Coomy's widowed mother, for whose tragic death they hold him responsible.

Meanwhile, Yezad struggles to make ends meet as a clerk at a sporting-goods shop, resenting the additional burden of his father-in-law while trying to resist the siren call of illegal gambling and other illicit temptations. The children, Murad and Jehangir, grow up increasingly aware of their parents' distress while tenderly discovering their love for the family and their dying grandfather. Jal, haplessly fiddling with his hearing aid, is relentlessly bullied by his strong-willed sister, the bitter Coomy.

All of the main characters change profoundly in the course of the novel, not necessarily for the better; some grow, some die. But their hopes and fears, their dreams and disappointments, are rendered with such great sensitivity and gentleness that it is impossible not to care about them. In his loving recreation of the trivial and yet life-affirming transactions of domesticity, Mistry draws the reader so deeply into his characters' lives that the smallest of emotional moments carries a powerful poignancy.

There are many such moments, each exquisitely rendered: Roxana watching the 9-year-old Jehangir raise a spoon to his ailing grandfather's mouth; Murad walking home from school to be able to save his bus fare to buy Jehangir a Christmas present; Jehangir pretending to sleep so as not to spoil his brother's satisfaction at slipping the gift into his stocking at night; Yezad, after months of resistance, helping Nariman with his ablutions, then catching sight of his wife, "her eyes overflowing with gratitude so intense, he averted his own in guiltiness."

Mistry also lovingly invokes Bombay itself, mainly through the passion that Yezad's good-natured, idealistic and doomed boss, Mr. Kapur, feels for the city. But above all, in his loving catalogue of the daily intimacies in the Chenoy home, Mistry confirms what he puts into the mouth of a minor character: "without family, nothing else matters, everything from top to bottom falls apart or descends into chaos." Or as Nariman says, glad that Yezad's application to emigrate to Canada has been turned down by an obnoxious immigration officer: "The loss of home leaves a hole that never fills."

Home and loss are recurrent themes in the novel, as in Mistry's previous books. "No matter where you go in the world," says Mr. Kapur, "there is only one important story: of youth, and loss, and yearning for redemption. So we tell the same story, over and over. Just the details are different." But they are different enough to reward the dedicated reader. Mistry's previous novel A Fine Balance, was deservedly praised (by myself among many others), but it was also weighed down by tragedy, as every misfortune and atrocity that had ever been inflicted upon anyone during Indira Gandhi's emergency rule was visited upon his protagonists. I found myself dreading the worst as I began to care about the principal figures in Family Matters, but I am pleased to report that Mistry defied my expectations. There are tragedies and painful setbacks in this novel, but often unexpected ones, and the most moving parts of the book have less to do with death than with the ennobling power of life.

For all its strengths, though, Family Matters does suffer from a few flaws: some minor characters whose two-dimensionality seems unworthy of Mistry's skills; a dramatic event or two that he does not do enough to rescue from contrivance; the occasional lapse into over-explication ("they were back where they started, hurt and angry, their reasoning clouded by fatigue and frustration"). And there is a gratuitous side-swipe about Indian authors writing "magic-realist midnight muddles" that a wiser editor might have persuaded Mistry to excise. But these are minor failings in a superb work that confirms Rohinton Mistry's reputation as a novelist of the highest quality. *

Shashi Tharoor is the author of "The Great Indian Novel" and, most recently, of the novel "Riot."