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Anarchy is to the porters of New Delhi station what order is to the clerks of the Credit Suisse, Geneva: without it they would be lost.

In the pre-dawn glimmer, Platform 7 seethes with life like a hundred Piccadilly’s at rush hour. Red-jacketed coolies stagger towards the first Class under a mountain of packing cases and trunks. Lower down the platform, near third Class, solitary peasant women sit stranded amid seas of more ungainly luggage: cages and boxes, ambiguous parcels done up with rope. Fishing fleets of vendors trawl the platform selling trays of tea in red clay cups or the latest Bombay film magazine. In the middle of it all, the only stationary object in sight, stands the venerable Himalayan Queen.

You take your seat and wait for the train to leave. This is India, and the timetables here are metaphorical documents; like India's other sacred texts, they are not meant to be taken literally. Around you in the carriage India's Middle Class grumble in that old fashioned, bubbly English used in the 1930's Ealing comedies and still apparently de rigeur in the Delhi Gymkhana Club:

"My God Tiger! Railways are becoming more unpunctual every year, yaar?"

"Oh it's so exhausting, what with the children, the servants and the heat."

This hustle and bustle, this huge national grouch, is part of the great annual tradition: the flight to the hills. For five months of the year the sun bakes down on the burning plains, turning North India into one vast shimmering heat haze. For six hours each day it is impossible to move; the heat assaults you like a mugger as you leave the A.C.

But with the Himalayas so near, there has always been an alternative. In the early nineteenth century, throughout the Himalayas, the British cleared the virgin forest and built hill stations: little half-timbered villages that looked as if they had been magically transported from Surrey, complete with mock-Tudor houses with twitching net-curtains, Gothic churches, miniature theatres, teashops and lines of English cottage gardens littered with croquet hoops and English roses - yet all clinging onto a series of perilous ledges ten thousand feet above sea level in high Central Asia.

Like everything else connected to the British in India, the business of hill stations was shot through with concerns of precedence and snobbery. There were hill stations, and there were smart hill stations, and there was Simla. Simla was chic - always in a different class from its rivals - and for a simple reason: from 1830 until 1947 it was the summer capital of the British Indian Empire.

Every April, when the heat of Calcutta became unbearable, the entire bureaucracy of the Raj used to trek over a thousand miles to the cool of Simla - as absurd an undertaking as Whitehall moving for the summer to Aviemore. For seven months of the year, from April to October, one fifth of mankind was ruled from a Himalayan village connected to the outside world by a road little better than a sheep track. Here, willfully ignoring the geography of their location, generations of mandarins and their memsahibs gossiped, took tea and went to the races, as if they were somewhere in Surrey rather than on the borders of Tibet.

For above all, despite its extreme remoteness and inaccessibility, Simla was about Englishness, and the cloying nostalgia of the English exile for home. The town was an escape from the heat, but it was also, tacitly, an escape from India. As one disapproving official put it, 'sedition, unrest and even murderous riots may have been going on elsewhere in India, but in Simla the burning questions are polo finals, racing and the all-absorbing tennis tournaments.' Simla was, and remains, the ultimate symbol of the enviable - if ludicrous and somewhat careless - self-confidence of the Raj at its high Victorian climax.

In the wake of the Viceroy came the cream of Raj society: the Commander in Chief, the generals and the moghuls of the Indian Civil Service - as well as the greater part of British India's womenfolk. While the administrators got on with the serious business of running the Empire - building the railways, planning the invasion of Tibet, sending off spies to watch the Afghan border - the women set about organising a swirl of races and dances, tennis matches and tea parties, picnics and flirtations. As most husbands had to stay behind in their stations, women outnumbered men, and romance was inevitable. As Kipling put it:

Jack's own Jill goes up the hill, To Murree or Chakrata;
Jack remains and dies in the plains, and Jill remarries soon after.

The town described by Kipling in Plain Tales from the Hills seemed a wonderfully absurd Victorian fantasy. But what was it like today? I packed my copy of Kipling in a bag and booked a berth in the Himalayan Queen. Before long I was steaming through the Plains of the Punjab, heading for the old summer capital.

At Kalka - an arid, deserted place, all scrub, shale and cactus - you change trains; the Himalayan Queen reclines at the buffers as its passengers decamp onto a narrow-gauge miniature train. It looks like something out of a child's toy box: the old carriages are made of wood, painted a faded kingfisher blue, and they sit only ten people each. The engine is newer - it dates from the time of the Second World War - and it makes a noise like a London taxi.

Accompanied by a great deal of hooting, it jars into life and chugs uphill at a speed just a little faster than walking pace. As the temperature drops, minute by minute you see the vegetation change. Leaves widen, colours brighten. You stop at Edwardian stations with high Swiss Gables hung with flowering creepers. The relief is immediate and tangible, like coming up for air.

Eventually, as evening draws in, you turn a bend and catch a first glimpse of the scattering of bungalows, country houses and offices rising unannounced out of the deodars. Crowning Summer Hill is Viceroy's Lodge, a familiar silhouette of Victorian towers and pinnacles, a Scots stronghold looking strangely at home on the borders of Chinese Tartary.

Suddenly through the window you feel the first drops of rain blowing into the carriage. The sky darkens and the hillsides grow grey; a wave of nostalgia creeps up on you unawares: this is not the torrential tropical rain of the plains, but the familiar, hesitant, half-hearted drizzle of home.

Forty years after the British went home, the ghosts or the sahibs still haunt Simla. Their shadow lies everywhere: in the shooting sticks and riding whips in the shops, in the net-curtained windows of the bungalows named "Pine Breezes" and "Fair Views", in the crumbles and custards of the boarding house menus.

Today Simla is a stranger place then ever. The Sikh families up from the Punjab for a weekend look understandably uncertain about the mock-Tudor High Street, and they take refuge in a self-conscious formality. Everyone is on best behaviour. They dress smartly - in brand new turbans complimented by tweeds and ties - and they finish off the outfit with a walking stick bought from the Lakkar Bazaar. Children who slurp their ice creams are told off: you don't slurp ice creams in Simla.

Simla may be the best preserved Raj townscape in India, but no one could describe it as architecturally beautiful. Nearly all the buildings are roofed in corrugated iron giving even the grandest of houses the aspect of a village scout hall. Even in its heyday Sir Edwin Lutyens remarked that if Simla had been built by monkeys one would have said, "what clever monkeys, they must be shot in case they do it again." Other observers likened the tinned-roofed government buildings to discarded tramcars, toastracks, salvaged junk or armadillos.

Yet, if not beautiful, Simla remains endlessly intriguing. Just walking up the Mall, you come across the strangest sites. Arguably the oddest of all is the Anglican Christchurch, where the vicar once preached a sermon against 'the enormity of the crinoline, the extravagance of its wearers and the room it took up in the sacred edifice to the exclusion of would-be worshippers'; the following Sunday everyone appeared in their riding habits. Today the vicar counts himself lucky to fill more than two or three pews at the Sunday service. Yet the imperial memorials on the church walls are still gleaming, even if no-one in either country now remembers the Hazara expedition where Colonel Crookshank apparently 'died from his wounds', or the defence of Tank where George Hickey 'met his death attempting to capture an armed Mahsud fanatic'.

A little down the Mall lies the Gaiety Theatre, the place for amateur theatricals during the Raj. The theatre is tiny, just nine rows deep, twelve seats across, with the box of honour for the Viceroy and his staff still containing its full compliment of faded, crested chintz arm chairs. You could easily spend a whole day in here studying the production photographs: wonderful images of plays which must have been outdated well before they were performed in 1927: under titles such as The Fatal Nymph and Dear Brutus tall men with false moustaches are pictured kneeling down, proposing marriage to comely girls in flapper hats while outside conspiratorial house maids in starched linen hold up the Vicar in the front hall. Sometimes you mistake the names of the actors with those of the parts. Did names like Major Trial, Mill Mold and Miss Dunett ever really exist outside the pages of an Agatha Christie?

The Woodville Palace Hotel, home of the Maharajah of Jubbal, is another survival. The porte-clochere of the building is hung with wisteria and flanked by a pair of old canons. At the bottom, below the wicker deck chairs, a last gardener can be seen manicuring the grass with nail scissors, pulling out the daisies by hand, one by one. Inside, as liveried (but barefoot) waiters bring you a glass of whisky, you sit and take in the collision of different worlds clashing in the decor around you. Above the doorway, the sightless eyes of tigers stare down from their plinths; below is a signed daguerreotype of Queen Victoria. But on the opposite wall, beside the fireplace, lies the debris of a rather different side of a Maharajah's Simla season: "To Princess Brinda, with our sincere good wishes." The picture is of Laurel and Hardy. Beside and around it are other signed photographs of Hollywood stars: To Princess Brinda... from Marlen Dietrich, Maurice Chevallier, Clark Gable: shooting and snobbery, viceroys and film stars - everything that might interest a thirties maharajah is here.

Most resonant of all, however, is the old Viceregal Lodge, a grim Scotch baronial confection variously compared to a lunatic asylum, St. Pancras Station and Pentonville prison. For despite appearances, there was always a deadly serious side to Simla. The Viceroy was the spider at the heart of Simla's web of memsahibs and district magistrates, Great Gamers and imperial civil servants. From his chambers at the heart of Viceregal Lodge, the Viceroy pulled the strings of an Empire that stretched from Rangoon in the East to Aden in the West. Simla may have looked like Margate, but the town was in fact one of the great political capitals of the world, at its height every bit as powerful as Paris and Berlin. Here, behind the deceptively suburban mock-Tudor facade, were to be found all the departments of a great power - its strategists, soldiers and Foreign Office, as well as the formidable secret service.

In the evenings the Viceroy would hold balls as grand as anything thrown by the Czar, his only rival in Asia: from all over Simla, rickshaws would converge on Summer Hill spilling out their cargo of dinner-jacketed men, ball-gowned memsahibs and bejewelled Maharajahs: 'at the Viceroy's evening parties,' wrote Aldous Huxley 'the diamonds were so large they looked like stage gems. It was impossible to believe that the pearls in the million-pound necklaces were the genuine excrement of oysters.'

Today these parties are hard to imagine: the Viceroy's Lodge is now the Indian Institute of Advanced Studies, a hilltop retreat for Indian academics: where the British once waltzed and sipped cocktails, earnest seminars now debate the relevance of structuralism to Indian anthropology. When the Lodge was first built, the furnishings were supplied by Maples of London, and it was rumoured that Indian income tax was introduced to pay for it all; but now the Council Chamber is an office and fusty periodicals gather dust in the great Durbar Hall. Modern India does not respect its academics and the Institute is left critically short of funding and in continual fear of eviction. While I was there a rumour was circulating that the Government was planning to throw out the academics and to sell off the lodge to an international hotel chain.

In the meantime, the stonework decays, the elaborate plaster work is overcome with mildew and the windows are broken and not replaced. Saddest of all, Lady Minto's famous rose garden is falling into ruin: dog roses run wild, the lawns, thick with clover, are uncut, and docks and ragwort spread between the paving stones.

Simla - breathtaking yet tatty, grand yet decaying, is like nowhere else on earth: it is a hybrid, an idealised, picture-postcard memory of Britain, the romanticised creation of enervated exiles, as if recreated from the paintings on the tips of tins of shortbread. A cloud of nostalgia - memories of better days - hangs over the entire town and affects everyone in it. But it is still a unique place; absurd certainly, yet still more heavily flavoured with the after-taste of the Raj than anywhere else in India.

It won't always be that way. The town is changing and developers are moving in. The Simla Mall was once as chic as any street in the Empire; but now the tea rooms and grand hotels with their string quartets and starched linen have all disappeared, to be replaced by discount boutiques and tatty take-aways. Piece by piece the Englishness of Simla is being dismantled.

On my last day in Simla I visited Raja Bhasin, a local historian who has written the best modern book on Simla. I asked Raja how much of Victorian Simla was likely to survive into the next century.

"There's going to be little bits left behind," he replied, "but anything distinctive is going to go. Things are changing very, very rapidly. One by one the old British bungalows are being knocked down. In time nearly everything will go."

"So Simla's finally going to become part of India now?"

"In the end, India overcomes all the forces that invade it," said Raja. "That's what happened to the Moghuls. Now the same has happened to the British. In India time has a remarkable placidity to it. In the long run the British presence in these hills is going to be like... how do you put it?... a stone dropped in water. There are some ripples - maybe quite big ones - but after a while the surface is placid again."

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