The Borrowers takes place during the very late 1800s or early 1900's—a time when Great Britain was a huge world power with a vast empire that stretched all the way to India and beyond. So if you were scratching your head when you read that the English boy who becomes Arrietty's friend grew up in India, well, now you know how that works.
But enough about the world. Most of the book takes place in cozy little rooms in English homes, like Great-Aunt Sophy's house in the countryside. You don't have to know how to play croquet or hunt foxes to get a taste of this British flavor. The characters are always stopping to have tea (traditionally taken at four o'clock), or speaking very properly to remind you of the time and place.
Wait a second. This story is a framed narrative (that is, a story within a story), so in reality, the setting isn't Great-Aunt Sophy's house at all. It takes place somewhere else, in a slightly later time.
Our story begins at Kate's parents' house in London. Imagine your typical English house with a sitting room and a breakfast room, where Mrs. May and Kate crochet. This super cozy and old-fashioned environment is ripe for storytelling, so it's no wonder Mrs. May launches into a doozy of a tale right off the bat.
As they lose themselves in their crocheting, we get lost in the story, and when we open our eyes, we're in Great-Aunt Sophy's English countryside house, back in the day when Mrs. May's brother was just a boy.
The final setting of the novel is the teeny-tiny home within a home. Yep, we're talking about the borrowers' miniature home under Great-Aunt Sophy's clock. The borrowers re-create the bigger English house rooms using tiny things:
On the walls, repeated in various colors, hung several portraits of Queen Victoria as a girl; these were postage stamps, borrowed by Pod some years ago from the stamp box on the desk in the morning room. There was a lacquer trinket box, padded inside and with the lid open, which they used as a settle; and that useful stand-by—a chest of drawers made of matchboxes. (2.11)
See? It's just like a typical English room, except in miniature, which hammers home the idea that no matter how different people or creatures may be, fundamentally they are all the same, and we should treat them in the same way, too. Exploring how worlds within worlds fit into each other makes Arrietty and the boy realize they are not so different after all, which brings borrowers and humans together.