The award-winning writer, who has Indian heritage but was born and grew up in Leicester, echoes critics of Hollywood and the Academy Awards when he suggests gatekeepers are only recognising a narrow band of talent and ideas, which does not properly reflect society.
He explains: "Publishing in the UK is a white, middle and upper class monolith. Britain is 14 per cent non-white, yet how many authors reflect that? If it's more than 0.5 per cent, I'd be shocked," Rai tells AFP, in an interview ahead of his appearance at the Hong Kong Young Readers Festival.
The 44-year-old, who specialises in teen fiction, describes his background as "multi-cultural, working class" adding that traditionally, "people like me don't become authors".
He says: "It's about more than racism in society -- although that exists -- it's about publishers being unwilling to think outside of their narrow ivory-tower worlds and break with tradition.
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Rai acknowledges J K Rowling's first book was rejected by many houses, but insists "no ethnic minority authors or characters" would be able to make such an impact.
Diversity has been a watchword for the arts in 2016 so far -- the lack of ethnic minority nominees for the Academy and Brit Awards, were the subject of social media campaigns under the hashtags #OscarsSoWhite and #BritsSoWhite.
Rai concedes that although diversity is being discussed more in publishing, the industry is only paying lip service to the idea, with token minority authors, rather than making wholesale changes to improve the situation.
He warns this reluctance to take risks, challenge orthodoxy, and seek out unheard voices in society is not only failing aspiring writers, but readers as well.
"Mainstream publishing at present is staid and overly reliant on tried and tested formulas."
Rai, whose debut novel (UN)arranged Marriage has been translated into 11 languages and appears on the GCSE reading list, is also calling for more public libraries and a re-think on the importance of reading and literacy in the UK, which he says are undervalued.