Google and India Test the Limits of Liberty - WSJ.com In this case, it is not the search engine, but their social networking site "Orkut" which is the issue. Google's troubles stem less from their actions than the fact that they are the dominant social networking site in India, and so most of those issues happen on that site.
Google has been forced to take down a lot of content, and hand over the identities of many posters. If the examples in the article are to be believed, the threshold for censorship is not high.
At the risk of repeating myself, if you live in India and you want to say something that might push or cross the line, do it with robust anonymity technology. You might still have your post taken down, but they can't come after you.