The streets of the polyglot Notting Hill neighborhood of London are filled this weekend with costumer parades, colorful floats, steel bands, blocks of outdoor stalls and several hundred thousand people as Britain's West Indian community holds its annual Caribbean carnival.

Although there are now competing carnivals here and in other British cities where large number of West Indian immigrants have settled since World War II, the Notting Hill carnival's tradition, size and occasional violence have made it a symbol of Britain's relatively recent racial diversity and the tensions it has produced.

Those tensions appear to be worsening at carnival time this year. In a deteriorating economic climate, public opinion polls show that white Britain shares Prime Minister Margaret Thatcher's stated feeling of being "swamped" by the postwar wave of blacks and Asians from former colonies in the Caribbean, Africa, and Indian subcontinent and the Far East.

In turn, Britain's nearly 2 million nonwhite residents -- a little more than 3 percent of the population of almost 56 million -- feel increasingly rejected and discriminated against by the white majority. They suffer disproportionately from unemployment, poor housing and sanitary facilities and low pay. They are still stereotyped in the media and by politicans playing on racial fears.

All nonwhites here -- whether they are from Jamaica, Guyana, Nigeria, Kenya, Uganda, India, Pakistan, Bangladesh, Malaysia or Hong Kong -- are considered "blacks" or "colored." The government refers only to "immigrants" even though 40 percent of them were born in Britain of immigrant parents. Government documents sometimes speak paradoxically of "immigrants born in this country."

"That word 'immigrants' emphasizes that blacks and Asians don't really belong here and aren't really part of British society," said Ann Dummett of the Joint Council for Welfare of Immigrants. "Stopping immigration now and starting repatriation is where the political debate is, rather than increasing public awareness of the problems of these British citizens."

Thatcher's Conservative government now is writing new immigration regulations and citizenship legislation that will cut off almost all further nonwhite immigration and may force many immigrants already settled here to leave the country.

Both Labor and Conservation governments had already slowed nonwhite immigration to a trickle, allowing in only wives and children and in some cases parents or husbands of immigrants already living and working here. It now may become impossible for immigrants already settler here to bring in any relatives except wives and children under 18 and they will face entry delays of several years.

A new definition of British nationality, which is to be proposed along with the new immigration regulations this autumn, may force out of Britain some immigrants who have kept citizenship in the Commonwealth countries they came from or who have been slow to apply for British citizenship because they already hold British passports made available to them under a law extending a form of British nationality to colonial residents.

Already more blacks are leaving Britain voluntarily -- most of them West Indians, returning to the islands in disillusionment -- than are entering. Overall the population of Britain decreased by 17,000 last year.

Thatcher's across the board cuts in government spending also will take money from the deteriorating inner cities where many immigrants live and from the social services on which many of them depend. The spending cuts and Britain's continuing economic slide also mean fewer jobs for nonwhite immigrants, Irish immigrants and poor white Britons living with them in poor city neighborhoods.

"The blacks are concentrated in deteriorating inner city areas with whites who also are deprived and see themselves getting less of the cake and becoming a minority in their own neighborhoods," explained Herman Ousley, a community relations official in the run-down, overcrowded, South London neighborhood of Brixton, where 70,000 West Indians live among a dwindling number of Irish. "The resentment on both sides creates conflict, with the police in between."

Gangs of white toughs, who scrawl "blacks out of Britain" on walls, prey on Asian immigrants in neighborhoods like the formerly Jewish Brick Lane ghetto in East London, where the predominant Bangladeshi residents have formed vigilante groups to fight back.

Unemployed, British-born young blacks in Brixton, the children of West Indian immigrants who have been unable to move out of the ghetto, stand idly on street corners and clash with the police, who sometimes detain loitering youths under the Vagrancy Act of 1824.

Ousley, who himself was detained at the Brixton police station for complaining about the arrest of a local man said, "There is increasing antagonism here toward the police, even among older West Indians who came here with great respect for the law."

Police say crime is increasing in neighborhoods like Brixton and they blame alienated, truant and unemployed blacks. Police officers and white spectators also have been attacked by black youths at each of the last three Notting Hill carnivals, and police have fought pitched battles with black and Asian crowds protesting rallies by the neo-Nazi National Front, which is trying to drive all nonwhites out of the country.

Police officials point to a number of new community relations programs and more subtle security measures for events like this year's Notting Hill carnival. But Osley said, "All these attempts to bridge the big gap between blacks and the police have been cosmetic. With political fringe groups like the National Front ready to exploit that gap, one can only worry about the outcome,"

The National Front won only a minuscule share of the vote in this year's national elections, but many political observers say Thatcher took much of the potential white backlash vote with her pointed campaign promises to further restrict immigration and her reiteration that "people do feel swamped when the streets they had lived in for the whole of their lives are quite different now and the whole character of an area had changed."

Only two decades ago, the nonwhite immigrants were welcomed here to do jobs white Britons disdained in the then booming economy. West Indians, abruptly shut out of the United States by an immigration law there in 1952, were recruited here to help run the railroads, subways and buses and do unskilled work in factories and the growing service industries.

Indians and Pakistanis, escaping religious and political turmoil at home and in newly independent African countries were many of them had been merchants, came here to work long hours in textile mills and to take over thousands of unprofitable tobacco, food and specialty shops that they turned into thriving convenience stores.

Many Asians have been notably successful here, accumulating capital and buying their own homes. Asian merchants and home buyers have revitalized deteriorating inner-city Victorian neighborhoods in industrial cities like Birmingham and nearby Leicester. They form civic associations and build community centers, places of worship and schools.

The London borough of Hounslow, where about 10 percent of the voters are of Asian origin, recently elected Britain's first Indian-born mayor.

There are still problems in Britain's Asian communities. Rifts have opened among traditionally hostile religious sects and social castes. Asians seeking to preserve their old ways here -- pressing school authorities, for example, to separate boys and girls -- antagonize both white Britons and the Asians' own British-born children, who object to customs like arranged marriages, traditional dress for women, and work in the family store.

Despite these problems, Ousley said, the Asian community is gaining strength by "building an economic base here and by its young people adopting English values. The problems are much more acute in the West Indian community because there is no sense of integration or of creating an economy of its own. Young blacks see that their parents have gained nothing by their years of work for long hours and little pay."

In school, Dummett said, British teachers "see Asians as ambitious and smart, so they encourage Asian students, but not the blacks. Their teachers don't think they're intelligent. And they don't have an entrepreneurial tradition to build on.

"It is the alienation of second-generation West Indians in Britain that is the most striking problem. There is very little awareness of this among the white population. People here are more naive about race relations than any outsider can imagine."