One of the first instances that religion becomes a factor in the story is when Baby Kochamma falls in love with Father Mulligan, a Catholic Priest, and moves to the convent in order to be closer to him. She eventually looks for a way out since convent life and the food do not agree with her, but it creates a conflict in her family as her father then believes that no one will propose to marry her so he must send her away to America.
In general, however, the book is dealing much more with the conflict of social classes and structure including the problems with the untouchables in Indian society and interactions between them and touchables than it is with religion. The social considerations and political conflicts including that of the communist community versus the rest of the community overshadow any religious themes or questions in the novel.
Kerala, the setting of the novel, is one of the oldest Christian regions in the world. Since much of Roy's focus is showing the contradictory forces at work in the area, religion plays significantly into the paradoxical combination of forces at work. Roy is most obviously criticizing the caste system, which is at odds with both Christianity and communism. Ammu's family is for the most part Catholic, but they honor the caste system that treats paravans as subhumans, who should walk backwards so that they can sweep their footprints away.
Roy explains why the Communist party was successful in the Christian populated Kerala.
There were several competing theories. One was that it had to do with the large population of Christians in the state . . .Structurally--the argument went--Marxism was a smple substitute for Christianity. Replace God with Marx, Satan with the bourgeouisie, Heaven with a classless society, the Church with the party, and the form and purpose of the journey remained similar.
The trouble with this theory was that in Kerala the Syrian Christians were, by and large, the wealthy, estate-owning (pickle factory-running), feudal lords, for whom communism represented a fate worse than death.
Roy goes on to explain a better theory: as long as communism did not upset the traditional caste system, it was allowed into the region. Both communism and Christianity were tolerant of the caste system. We see throughout the novel that Christians and communism are both part of the machine that ultimately crushes Velutha, the Untouchable.