Setting
Shanghai, China, and India, 1935
Not Made in China
The Temple of Doom opens not in a temple of doom, but in Shanghai. It's glittery. It's glitzy. It's also surprisingly full of white people—wait, is this another anachronism?
Nope. Shanghai was heavily populated by non-Chinese in 1935. The British began trading with Shanghai in 1842, and it was soon populated by British, French, and Americans, and Shanghai itself operated independent of the rest of China. There would have been blonde American women headlining jazz numbers. (Source)
Thuggee Life
The Maharaja is the 1% of India. He lives in a huge palace filled with jewels (and to be fair, a bit of a bug problem), while the villagers nearby live in abject poverty. Pankot Palace was deserted in 1850, but there's a new Maharaja in town. However, we're not told where he came from. If you've seen the prequel Star Wars trilogy, you know that social structures and politics are not George Lucas's strong suits.
What's important with this setting is the historical background. The Thuggee cult isn't something that Spielberg and Lucas came up with. They are a real group of people responsible for thousands of gruesome murders in India in the 19th Century. (Source)
We find out about them in a moment of pure exposition when the Maharaja gives his speech:
MAHARAJA: I have heard the evil stories of the Thuggee cult. I thought the stories were told to frighten children. Later, I learnt the Thuggee cult was once real and did of unspeakable things. I am ashamed of what happened here so many years ago, and I assure you this will never happen again in my kingdom.
That's a big promise coming from a pre-teen.
The setting is effective because it uses pre-existing fears about a foreign land and capitalizes on them. Aside from the Thuggee, the film has little to no understanding of Hinduism or Indian culture. It fundamentally misunderstands the role of the goddess Kali, although, to be fair, so did the Thuggee themselves.
But the movie features a Voodoo doll, which there's no excuse for. Voodoo is an African/Caribbean spiritual practice, y'all.