Is the Empire striking back?

A 60 feet long sand sculpture of an Indian national flag and a Mahatma Gandhi portrait was created by sand artist Sudarshan Pattnaik at the Puri sea beach of Orissa, 14 August 2007. Photograph: EPA

Shishir Bajoria is meant to be talking about India's rise and the world economy, but first he wants to raise the really big stuff. "Have you seen the cricket?" he asks, and launches into an unkind description of the Australian player he saw whingeing on telly this morning about the bullying Indian cricket board. "A white man - a white man! - complaining about racism." And he throws up his palms as if to say, how upside down can you get?

That's not the only topsy-turvy thing around here. Take our location: the Bengal Club, the leading social club in Calcutta, former capital of British India. There was a time when it wouldn't have let the likes of Bajoria through the door. "In the Bengal Club, they don't allow dogs or Indians," reported Somerset Maugham in 1938, "but in the Yacht Club in Bombay they don't mind dogs; it's only Indians they don't allow."

Calcutta is now called Kolkata and the Bengal Club's receptionist soon tumbles from wobbly English into Hindi, but the colonial relics are still on display. There are stern, 10ft-tall portraits of club luminaries Macpherson, Metcalfe and Marten. The only one who lets on that running the Raj might be slightly more fun than a spell in Guantánamo is William Bracken, a customs collector. He wears evening dress and what looks suspiciously like a smirk.

Upstairs in the tearoom are Kolkata's modern burrasahibs, its ruling class, and there in the corner is Bajoria. With trimmed beard and white national dress, he could be a reformed poet. Instead, he's something much newer to these parts: the owner of an Indian multinational. A decade ago, Indian businesses rarely ventured aboard. Yet in the past few years, Bajoria's steel firm has bought rivals in Britain, America, Brazil and China. And last year, Indians bought nearly $18bn worth (£9bn) of western companies; more than five times the value of western takeovers in India. Breaking off to check his mobile, he says, almost apologetically, "One of my team is in Germany, looking at another acquisition."

There's a common theme to these Indian takeovers, thinks Bajoria. "For years, globalisation was something the west did to the rest. Now the boot's on the other foot." How should westerners feel about that role reversal? "If I were them I'd be bloody worried." Then Bajoria, who knows the UK so well he can tell you the train times from Charing Cross to Tunbridge Wells, tries to think up some consolations, before giving up. "It's a big change. Of course I'd be worried."

A funny thing happened to the world economy this year: it tilted. Pretty much ever since the 60s, America had been the undisputed centre of business. It had the biggest economy; the No 1 economic model (or so the zealots kept telling everyone); the blue-chip banks; the world-beating businesses. Le défiaméricain was how France referred to Ford, IBM and the rest, meaning the American challenge.

Then came last summer and the biggest banking crisis America has had in decades. The economy? Almost certainly in recession. The model? Obviously, no longer so exemplary. The banks? Some of the biggest are being propped up by money from governments in the Middle East and China.

Amid all this, Asia is booming. China is the world's fastest growing economy, and India's national income is rising like never before. This shift of economic power from west to east, and other developing countries, has been going on quietly for a long time - but the credit crunch has both accelerated and exposed it for all to see.

Then there are the business deals, those rough and ready reckoners of where economic power lies. Tata announced this week that it would take over Jaguar and Land Rover. Both firms are in the DNA of British manufacturing and the seller is Ford, one of those American corporate imperialists so deplored by the French. Whatever this deal's strategic purpose, its symbolic significance is undeniable.

The British press wrote up the £1bn sale as another paragraph in the obituary of a once great manufacturing base. On the subcontinent, newspapers chalked up another victory for "India Inc". "Tatas rule Britannia," crowed the Times of India on its front page: "It took a company from a former colony to come to the rescue of a beleaguered British brand."

"I don't like all this 'India Inc' talk," says R Gopalakrishnan, executive director at Tata, when we meet just before the deal is confirmed. Can he see why there might be British sensitivities about two iconic businesses being run by an Indian firm? "No. Isn't Harrods run by a foreigner?" Gopalakrishnan's press officer cuts in to suggest Tata might not care to be cast as the next Mohamed Al Fayed.

Take two. "We are not even at the start of this process of acquisitions. Indians will buy many more companies." His two gold rings catch the light and twirl it around the room. "And we will compete with the west in all the industries." We? He is a patriot after all. "All the areas," Gopalakrishnan continues. "From natural resources to aerospace." Is he suggesting India could soon make its own jet planes? "Why not?" It's easy to see why he has such confidence. In the past four years, India's economy has grown at its fastest ever and the prime minister, Manmohan Singh, claimed it could keep motoring at 9% per year.

But there is more to India's optimism than economic growth, thinks Karan Paul, head of the Apeejay Surendra conglomerate which has interests in everything from Typhoo tea to shipping. "Nowadays, people want things to feel Indian," he tells me by the pool at one of his hotels. "Our music TV channels used to be in English - now they're in Hindi. The elite watch all the Bollywood movies they used to sneer at."

Two events, he thinks, got Indians ready for superpower status. The first was the atomic missile test of 1998, when India finally admitted it had nuclear bombs. "We were suddenly part of a select club." More useful, though, was the building of a highway that linked the major cities. "We obviously have huge issues with poverty and with our infrastructure. But the national highway showed India could do more than incremental change - we could make a quantum leap."

Just around the corner from Paul's hotel is a huge hoarding: "It's not important how you start, but how you finish - Kolkata Next". Some forecasts for where India goes next go a bit heavy on the spice.

India's Century, by the commerce minister Kamal Nath, is a book on how "the 21st century is poised to be India's century". By 2020, Nath writes, Davos will no longer be, well, Davos - instead the World Economic Forum should move its meeting place to Mumbai (Kashmir offers great skiing, apparently). And the New York Times might consider relocating to China or India, which will "offer the largest markets for the products they advertise".

About four years ago, Kamlesh Pandey came up with a TV advert for an after-dinner digestive. It showed an Indian executive being chauffeured around London. On driving past the headquarters of the East India Company, he orders his assistant to buy it. "For hundreds of years, they ruled us," he says. "Now it's our turn."

How, I ask Pandey, did you dream up that idea? "My friend, Subhash Chandra [a TV mogul] bought a British company," he says. "He did it out of patriotism - to show the British. So what did he buy? "He hunted till he found the original East India Company." It was in shipping, a business Chandra knew nothing about. "We all said: are you crazy?" That didn't matter; he'd shown them.

Any superpower, however, surely needs more guiding values than vengeance. Is India an alternative to the American business model, or an imitator?

I put that question to Nirupam Sen, the minister for industry in Kolkata and the surrounding state of West Bengal. Part of a Marxist regional government that has been in elected power for the past 30 years, Sen has his office in the Writers' Building in Kolkata. Formerly the redbrick home for clerks of the Raj, it is now guarded by a massive statue of three freedom fighters wielding fierce-looking handguns. Surely he'll strike a defiant note?

Sadly not. "India is becoming a fully-fledged capitalist state," he says. "We are privatising our industries and falling deeper under American influence." Even for a party that often tussles with the national government this seems severe. Lots of industries are still in state hands and the prices of many goods are capped to protect the less well-off - the constitution even requires that India be "socialist".

What about his own state government, which has cleared agricultural land for the benefit of big business investors (including Tata)? At least, Sen argues, "the Bengal government requires any business coming here to provide proper facilities for workers. Other states don't do that."

In his office is a 3ft portrait of Lenin, only partly obscured by a bunch of long-stemmed flowers. Sen meets the likes of IBM and Microsoft in this room; how do they react to his hero? He grins.

There's obviously a way to go before India looks too much like America. It's not just Marxist ministers who don't take after their western counterparts; it is also the business people. Bajoria writes briefings for the Marxist government; Tata gives a third of its profits to charity; then there was the young banker I met on the metro who said: "For most Indians, capitalism is a foreign word."

For westerners, the most immediate impact from the fast-growing India and China has been a higher cost of living. Despite the US and UK facing a severe slump, oil remains well over $100 a barrel. That and the higher price of a variety of commodities, from steel to soybeans, is often largely down to increased demand from Asia.

Over the longer term, the sheer size of the two new giants could force a rejig of markets - and companies. Distributing novels over mobile phones has been a big hit in China, so John Makinson, head of Penguin books, is introducing it in India. "There used to be a cultural hauteur among publishers: an idea had to prove itself in New York or London first - then we'd export it to India and China," he says. "Now we'll take something that works first in Beijing or Delhi and try it elsewhere."

In finance, Shanghai and Mumbai may soon rival Wall Street and the City for influence, thinks Frank Hancock at ABN Amro in India. The man who put the billions in place for Tata to buy Corus, Hancock says: "Stockmarkets in India and China are growing so fast they could easily be as big as Wall Street within a decade. If that happens, it might be that a crash in Mumbai sends shockwaves through New York - rather than the other way around."

These predictions do not hinge on economics so much as demographics. India and China have such big populations that, as they get tied into the global economy, they can't help but have huge impacts on the rest of the world.

"We could be going back to a division of the world economy such as we had before the Industrial Revolution, where India and China once again dominate due to sheer size," says Greg Clark, an economic historian at the University of California. "They could constitute a demographic dictatorship."

What does he mean? "For over 200 years, the west has had its own way. Now it will no longer be able to get its resources so cheap. Nor should we carry on expecting the rest of the world to learn English, say."

Economists do not usually talk about power; they prefer to talk about trade. At first, Clark sticks to the script, and reminds me that 40% of his Californian students are of Chinese origin. But as he goes on he looks increasingly doubtful. "As well as Shakespeare, British children might have to struggle through Chinese or Urdu classics."

There's a long pause. "A lot of people might not like that. Me included."