Shortly before dawn broke over this dreary industrial city, a handful of men in khaki shorts and white shirts appeared at a vacant lot between two crumbling baked-mud houses.

They sprinkled the red earth with water to hold down the dust and set up collapsible flagstaff. By 6 a.m., 80 men and boys had joined them. A whistle blew, orders were snapped in the ancient Sanskrit tongue and they formed neat files.

From the front rank, a man stepped forward with a small cloth bag from which he unfuried a triangular saffron flag. He tied the flag to the staff and the men, saluted, swinging their right hands to their breast bones.

They sang a song in praise of the past glories of India and its ancient heroes. Then they began ritual calisthenics, reciting the 12 ancient names of the sun, as prescribed in the Hindu mentros.

Anothercommand. The ranks broke and games began. The younger men played a rugged form of tag. The elders sat cross-legged in a circle on the ground and played a kind of "Simon says."

One last command. They returned to ranks and, facing the flag, they recited a prayer: May God grant us virture so that we can help rebuild our exalted nation of the past.

One hour had passed. The men dispersed to their homes or jobs. The scene is repeated on theis vacant lot and on 10,000 like it by associated groups throughout India every day of the year.

In all, the allegedly paramilitary, anti-Moslem organization known as the Rashtriya Swayamsevak Sangh (RSS), or National Self-Service League, has 500,000 members who turn out each day. Their purpose, according to their leader, Guru Balasaheb Deoras, is "to unite the people of India, to create a feeling of brotherliness, to incuicate a sense of responsibility, to build character and a sense of discipline."

The guru said thet the difference between the discipline of the RSS and the discipline Prime Minister Indira Gandhi sought to establish during the 20 months of emergency rule she imposed, is that "She attempted to impose it by force while we seek to discipline ourselves. We volunteer to subordinate ourselves to the RSS and to the country."

If all this strikes the casual observer as reminiscent of the Boy Scouts, there are large numbers of Indians who see in the RSS something terribly sinister. Since the organization was founded by a non-practicing physician in 1925, it has had the reputation of being fascist and militaristic.

This image was burned into the popular mind when Mahatma Gandhi, the founder of modern India, was murdered in New Delhi on Jan. 30, 1948 The government of the late Prime Minister Jawaharial Nehur sought to link the RSS to the assassination and be abbed the organization.

An official investigation determined that the killing was done buy a Hindu fanatic, but one who was not an RSS member. Yet the image remained. And the RSS did little to dispel it.

Then, when the emergengy was imposed, the RSS was once again banned, along with the Moslem Jamaati-I-Islami Party, the Maoist Naxalite movement and a number of other extremist groups. Deoras was arrested and was held until March 21.

"During my imprisonment, I met with many Moslems, Naxalites and others who had incorrect ideas about the RSS," Deoras said in an interview at the organization's national headquarters in Nagpur. "i realized from what they said that we suffered from a great weakness in our publicity to combat government propaganda."

These disucssions in jail, he added, also led him to realize that "A large number of Moslems, particularly the young people, want to join the national mainstream." Thus, he said, when the RSS holds its national convention here later this month, it will discuss the possible admission f Moslems.

"A final decision won't be made at this time," Deoras said. "We'll begin to move slowly and I believe it will take at least one year."

At 62, he is soft-spoken but exudes vigor. He had just returned to Nagpur after a gureling, month-long tour of the entire country in the hottest time of the year.

Like nearly all of the 1,000 organizers, Deoras is not married. "We're something like catholic priests in that regard," he said. "But we take no vows. We simply devote our entire lives to the RSS because we believe we can rebuild India into a great, strong and united Hindu country, as it once was."

From the RSS' viewpoint, he said, "Hindu" referred to "a culture, not a religion. Thus Moslems need not fear we would subvert their faith."

The RSS has already begun to change its popular image. Its first step was to send its highly organized cadre into thousands of villages, particularly in northern India, to campaign for the People's Party, which overthrew the Congress Party in the March national elections.

"There is no doubt that the RSS played a key role in the victory," said Romesh Thapur, publisher of the New Delhi Quarterly magazine Seminar and a leading liberal intellectral. "No other organization n India has anything like their superb discipline."

Deoras, who insists that the RSS is a "cultural" body that does not noramlly involve itself in "Power politics," said the March elections were an exception. "We had no choice but to campaign for the [People's Party] if we were going to drive Mrs. Gandhi out."

The succesful campaign brought to power two former RSS members, Atal Bihari Vajpayee, who was named foreign minister, and Lai Drishinchand Advani, information minister. Both men have reputations among Hindus and Moslems for impeccable honesty and administrative skill.

In the state elections to be held the middle of this month, some RSS workers are campaigning for Moslem Candidates. Whether this foreshadows and end to the communal discord that has plagued the Subcontinent for centuries cannot yet be known. A dream the RSS quietly harbors is to "reunite" Pakistan and Bangladesh - both Moslem states - with India.

But, because the RSS is taking an initiative at home at least some Moslems here are optimistic. In a large, cool apartment above his successful electrical supply shop in central Nagpur, a prominent Moslem businessman named Murtaza Bhai Kamal put it this way:

"It's something like the relationship between a pygmy and a giant. If the pygmy makes an offer of friendship, it means nothing. He has no choice. But when the giant makes the offer, that means a great deal. This is what is happening in India today."