"I feel -- if I can say an unkind thing -- that the English are at their best when you can outnumber them."

The words roll trippingly off Salman Rushdie's tongue in immaculate Cantabrigian. Close your eyes, and it's the voice of the Empire -- not of a wiry, dark-eyed expatriate Indian novelist furtively skinning alive his fellow man.

"Because then they have to behave themselves," Rushdie goes on. "They then have to accept that there are other views of the world. When the English are in force, you see, they become conquistadores."

This from a chap, oddly enough, who has spent most of his 39 years in England being nurtured by its best schools and encouraged by its leading lights; whose closest friends (including an ex-wife) are English; whose only son is half English, and who is celebrated today -- by the English -- as one of the worthier writers alive.

"I felt I knew England. I felt I'd grown up in it, in a way," says the winner of Britain's prestigious Booker Prize, whose epic phantasmagorias about the Indian subcontinent convey the disjointed reality of exile. "But the thing that really shook me was the Falklands war -- the atavistic, jingoistic patriotism that was released. It was terrifying to behold.

"All the old imperial values were yanked out again, so that the popular press was inviting its readers to sponsor missiles, to send in money to pay for bombs which would then have the newspaper's logo printed inside -- sponsored 'Daily Express' bombs to be dropped on the Argentines.

"It was a hideous event inside English culture, in which perhaps the most hideous thing was that it was impossible to know which way your friends were going to jump. And I felt suddenly that I was among strangers. That in spite of all these years, I didn't know these people. That no matter how long I've been there, how well I've fit into the society, how well I understand its rules and play its games . . ." He gazes gloomily into his glass of white wine.

"And at that point," he adds, "I began really seriously to think about leaving -- and I haven't stopped."

If ever he does depart that sceptered isle, it's not clear where he would go. His well-to-do Muslim parents and other close relations now reside in Pakistan. Rushdie, born in Bombay, feels more at home in India. And while he treks to both countries now and then, he always manages to return to Britain.

He first arrived, at age 14, to enroll in the Rugby School, went on to Cambridge, worked as an actor in fringe theater and as a copywriter in advertising and then, after publishing his first book, "Grimus," at 28, started thriving as a novelist.

"Midnight's Children" -- the second and best known of his three novels so far -- is the saga of modern India from the occasionally hallucinatory perspective of Saleem Sinai, born "on the stroke of midnight" on the new nation's first day, Aug. 15, 1947. (Rushdie himself had come into the world two months before.) After the book was published to great acclaim in 1980, the writer received an invitation to 10 Downing St. for lunch with Margaret Thatcher and Indira Gandhi, who was then in London for a festival of Indian culture.

As Rushdie tells the story -- and he tells it as often as possible, grinning like a wicked little boy -- he was startled at the invitation, not least because his novel was less than flattering to the Indian prime minister. Apparently no one on Thatcher's staff had bothered to read it -- but Mrs. Gandhi had. Indeed, at the time of her assassination in October 1984, she was still suing Rushdie in the British courts over a line suggesting that her "younger son Sanjay accused his mother of being responsible, through her neglect, for his father's death . . . "

Rushdie phoned Thatcher's office to warn of the impending faux pas. The voice at the other end was horrified, but polite. An invitation was an invitation, the aide said glumly. Rushdie, too, was disappointed: He had been rather hoping it would have to be publicly withdrawn. The ball in his court, he decided to send his regrets -- at which the aide sounded greatly relieved.

In the end it was Thatcher herself who guaranteed Rushdie the attention he desired. In a speech the following day, with Gandhi in attendance, Thatcher -- distracted perhaps by the sinking British pound -- managed to invoke "Midnight's Children" as a crowning example of the strength of the Anglo-Indian cultural bond. Then, to compound her gaffe, she added in a helpful aside to the Indian leader, "You remember Salman Rusdhie -- he's the man you met at lunch yesterday." At which Mrs. Gandhi smiled strangely.

"Mrs. Thatcher will never ask me to lunch again, of course," Rushdie says with an air of deep satisfaction. "She also knows that I've told this story -- and Mrs. Thatcher is a vengeful woman."

Rushdie warms to his subject.

"There is this extraordinary problem," he insists, "that many people find her sexually attractive. Many very otherwise hard-boiled journalists I've talked to -- ultracynical, Gauloise-smoking television and press journalists -- talk about the great physical attraction of Margaret Thatcher -- which, I'm afraid, is obscure to me. It's the attraction, I think, of the nursery -- the idea of having a strict woman to tell you what to do."

Rushdie, not surprisingly, has a very active dream life -- a useful thing, he says, for a novelist to have. When he visits his native land, he dreams in Urdu.

"Dreams are wonderful, you see, because they do everything -- they can make you reveal yourself, they can be allegorical, they can be symbolic, they can be naturalistic, they can be all those things at once. For instance, last night I had a very uncomplicated anxiety dream about my son being hit by a car. There are not many interpretations of such a dream, except that I was anxious and sleeping badly in an overheated hotel room.

"On another level," he says, "I've had very elaborated world-destruction dreams."

In one nocturnal apocalypse, Rushdie destroyed the world with two 10-shilling notes. "Shows you how long ago the dream was," he says, "because a shilling no longer exists as a unit of currency, and the 10-shilling note has not been in circulation for a decade."

In the dream, Rushdie was handed the two notes by a Martian in a Mercedes-Benz, who required him to crumple them and throw them into the sea -- whereupon, 10 minutes later, the world was scheduled to end. Rushdie got into the Mercedes, which took off vertically and became a spherical rocket ship. At the moment of destruction, he was hovering over the Earth with a perfect view. From the other side of the planet came an extraordinary, frightening glow. After a moment, it faded away. Then blood poured like tomato ketchup over the top of the globe -- and eventually engulfed it.

"I woke up screaming, I actually did," Rushdie says. "I mean, how would you feel to be responsible for the end of the world?"

E.M. Forster, author of "Passage to India," had a similar sensitivity to dreams. Rushdie got to know the literary legend in the mid-'60s, when Forster was a fellow, and Rushdie a student, at Kings College, Cambridge. The old master confided to the neophyte that he often dreamed not in images but in sentences, and had trained himself to wake up and record them in a notebook he kept at his bedside.

"When he looked at them the next day, they would be very profound philosophical remarks which he usually didn't understand, but which sounded very good," Rushdie reports. "And whenever he felt the need of such a remark in a novel, he would open his notebook and use one of these sentences. So 'Passage to India,' in a way, is a product of Forster's dream life."

Rushdie's bouts with the blank page are not quite so full of mysticism. Currently in the throes of his fourth novel, "The Satanic Verses" (involving Indian and Pakistani characters in London and -- lest anyone confuse it with social realism -- the Archangel Gabriel), he describes his creative labors as a settled routine.

Albeit an angst-ridden routine.

"Every novel that I've ever written," he says, "has come about in the following way: For a long time I think I don't know what I have to write. Then gradually I begin to think of stories, fragments, incidents or characters, quite disjointedly, in such a way that there's no indication that these are part of one story. Then I begin to panic about not having a book to write. And so I try to formalize these vague notions, and I start trying to write things down.

"And then I have a moment of great optimism when I discover that I have nine novels to write that are going to occupy me for the next 20 years. And then I try and decide which one I'm going to write first. And then I ache more, waiting, and then everything disintegrates. And I realize I haven't even got one novel, let alone nine.

"And then, at some moment, I find, without quite knowing how, that all these fragments of ideas have in fact been part of a larger idea that, without knowing it, was really what I was thinking about -- and that's the novel I have to write."

Thus "Shame," his most recent novel, synthesizes such disparate notions as "a wedding in which, at the last minute, there was a change in bridegroom, with comic results . . . three women who decide to share a child so intimately that the child never knows which of them is the mother . . . an image of contemporary politics as one of national tragedies being enacted by circus clowns . . . and a girl who was excessively receptive to the emotion of shame -- in a way, she sucked it in and then a violence burst out of her."

The widely praised result, nominated for the 1983 Booker Prize, is a surrealistic fugue on the theme of recent Pakistani history: specifically, the grim shenanigans of fairy-tale stand-ins for Pakistan's current president, Zia ul-Haq, and the late prime minister, Zulfiqar Ali Bhutto, whom Zia deposed and had executed in 1977.

"It is probably easier to play croquet as in 'Alice in Wonderland' with flamingos as mallets and hedgehogs as balls," wrote critic Robert Towers, "than to give a coherent plot summary of 'Shame.' "

Inevitably, Rushdie has been labeled a "magic realist," a term associated with Gabriel Garci'a Marquez and others who tend toward the fantastically grotesque. Rushdie says he feels "not good, really" about having the epithet applied to him, what with its implication of escapism.

"I grew up in a literary tradition -- one can mention the 'Arabian Nights,' for instance, in which it was clearly understood that stories were untrue -- where horses flew and so did carpets," he says. "And in spite of that blatant untruth, they reached for a deeper truth. So I grew up in a world in which it was understood that fiction was a lie -- and the paradox was that the lie told the truth.

"It seems to me that the world is not naturalistic. Naturalism is based on the idea that one thing happens at a time. But the common experience of all of us is that many things happen at once -- that at any given moment of our lives we may be suffering from a hangover, affected by a conversation we had yesterday, worried about a financial difficulty we have to solve in the next couple of months, having this conversation, unwell, crossed in love. . ."

The look on Rushdie's face just now suggests all of these sensations.

"It seems to me that the central point," he goes on, "is that reality is not realistic. And that if those novels -- my novels -- reflect the grotesque, gargantuan, surrealistic reality in which we all live, then those are the realistic novels, and the ones that take place in middle-class houses on Long Island are the ones that aren't telling the truth."

Rushdie came to New York to take part in last winter's week-long international writers' congress, a progressively more ponderous affair treating "The Writer's Imagination and the Imagination of the State."

"I think a kind of height of banality was reached," he says with a sigh.

"The distinction between the imagination of the state and the imagination of the writer is a kind of false separation. Because, after all, the state is entirely composed of words. It's based on a constitution, and a writer wrote that. It exercises itself through laws, and those are also written. A politician's speech is a piece of writing." What was happening at the conference, he concludes, was "more in the nature of a civil war inside the world of words.

"The powerful have always understood that the language is of paramount importance. I think that the distortion of the language and the possession of the language by the powerful are perhaps the major challenges to creative writers today."

As an erstwhile copywriter, Rushdie is particularly attuned to word-perversion; he spent 10 years whipping up clever slogans to subsidize his fiction. Advertising, like England, is a subject that brings out his pained ambivalence.

"I mercifully have written very few famous advertising campaigns," he says. "However, I did write two -- but it's a long time ago, and I think we should draw a veil over it."

Then he falls uncharacteristically mum.

After some prodding, he explains: "The English writer, Fay Weldon, is well known for having originated the line 'Go to work on an egg' when she was writing advertising for the Egg Marketing Board. And the idea of being forever associated with such a line is so upsetting to me . . . It gave me money, you see, but it didn't teach me a thing."

The experience did, however, let him in on certain dark secrets of capitalism.

"Because the way in which industries talk to their advertising agencies is more open than the way in which they talk to everybody else," he says. "So you actually find out what's happening. And, over a period of years in such a business, you find out an awful lot of dirt on an awful lot of stuff.

"This," he adds, in a possibly sinister undertone, "is useful."

In what way "useful"? Salman Rushdie grins.

"I know that, at some point, I will bite the hand that fed me."