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Of all of India's major cities, only Delhi was already ancient when the British arrived. Smack in the middle of the northern plains, the city has always been prized by South Asia's rulers—their dwellings and forts still stand in clusters, testaments to a long imperial cycle of sacking and rebuilding. The Moghuls, with their exalted Persian aesthetic, left the most striking legacy, but now, in modern-day India, even they compete for attention with bustling cafés and sleek designer boutiques.

In Delhi, the different versions of modern India all coexist, and its contradictions become abundantly clear. Newly minted junior executives ride in chauffered, air-conditioned comfort as the millions of children on the capital's streets beg for change and hawk magazines. To feed the consumer craze of India's rapidly expanding middle class, gleaming mega-malls on the rise in some parts of the city tower over splendid Moghul monuments, some of which stand crumbling and forgotten in residential areas. It is entirely possible to find your own corner of the capital and feel like you've disovered a secret thanks to its rich, multilayered history.

The ancient epic Mahabharata places the great town of Indraprastha on the banks of the Yamuna River, perhaps in what is now Delhi's Old Fort. Late in the first millennium AD, Delhi became an outpost of the Hindu Rajputs, warrior kings who ruled what's now Rajasthan. However, it was after 1191, when Mohammad Ghori of Central Asia invaded and conquered, that the city acquired its Islamic flavour. Other Afghan and Uzbek sultanates handed Delhi back and forth over the next 300 years, until the mighty Moghuls settled in. Beginning with the invasion of Babur in 1526, the Moghuls shifted their capital between Delhi and Agra until 1858, leaving stunning architecture at both sites, including the buildings at what's now known as Old Delhi.

The fall of the Moghul empire coincided with the rise of the British East India Company, first in Madras and Calcutta and eventually throughout the country. When several of Delhi's Indian garrisons mutinied against their Company employers in 1857, the British suppressed them, moved into the Red Fort, and ousted the aging Moghul emperor. In 1911, with anti-British sentiment growing in Calcutta, they moved their capital from Calcutta to Delhi—the ultimate prize, a place where they could build a truly imperial city that would dwarf the older ones around it. Architect Sir Edwin Lutyens was hired to create New Delhi, a majestic sandstone government complex surrounded by wide, leafy avenues and roundabouts, in contrast to Old Delhi's hectic lanes.

When India gained independence on August 15, 1947, with Jawaharlal Nehru the first prime minister, the subcontinent was partitioned into the secular republic of India and the Muslim nation of Pakistan, which was further divided into West Pakistan (now Pakistan) and East Pakistan (now Bangladesh). Trapped in potentially hostile new countries, thousands of Muslims left Delhi for Pakistan while millions of Hindu and Sikh refugees streamed in—changing Delhi's cultural overtone almost overnight from Persian to Punjabi.

Since Prime Minister Rajiv Gandhi (grandson of Nehru) and his successor, Narasimha Rao, began to liberalize India's planned economy in the late 1980s and early '90s, Delhi has experienced tremendous change. Foreign companies have arrived and hired locals for white-collar jobs, residential enclaves and shopping strips have sprouted in every crevice, and land prices have skyrocketed. Professionals seeking affordable living space now move to the suburbs and drive into town, aggravating the already substantial pollution problem. At the same time, North Indian villagers still come here in search of work and build shanties wherever they can, sometimes in the shadows of forgotten monuments. It is they—Rajasthani women in colourful saris digging holes with pickaxes, men climbing rickety scaffolds in sarong-like lungis—who build new homes for the affluent. Many Delhiites say, with a sigh, that their city is in a perpetual state of flux.

Precisely because of its cheek-by-jowl mixture of Old Delhi's Moghul glory, Central Delhi's European grandeur, and South Delhi's boutiques and lounge bars, Delhi is a profoundly Indian place. In the Delhi Golf Course, Islamic monuments share the fairways with peacocks; in Lodi Garden, they're interspersed with young lovers and families out for a stroll. Hindu temples, Sikh gurdwaras (temples), and secular discos are packed with their respective devotees. Yet, even as private enterprise transforms its business climate and social life, the capital remains a bureaucracy, with political big shots the talk of the town. Delhi is not the most beautiful city in India, but it is in many ways the grandest.