About a century ago, a series of giant murals was unveiled in the Palace of Westminster depicting the “Building of Britain”, which bounded in eight set-pieces from King Alfred’s long-ships beating back the Danes in 877 to bewigged parliamentarians presenting Queen Anne with the articles of Union in 1707. The penultimate scene travels to India in 1614, where the Mughal emperor Jahangir receives an ambassador from King James I, on a mission to promote trade with the newly chartered English East India Company.

From the hindsight of the 1920s, this embassy looked like a key step in the building of a British imperium that would end with Britain’s monarchs as India’s emperors. But the arrival of the British in India in the early 1600s looked very different at the time – and from the other side. A contemporary painting by the Mughal master miniaturist Bichitr shows a supersized Jahangir on his throne, bathed in a halo of blinding magnificence. He hands a Qur’an to a white-bearded Sufi, a pious gesture that doubles as a majestic snub: pressed into a lower corner is none other than James I, an overlooked supplicant, depicted in three-quarter profile, “an angle reserved in Mughal miniatures for the minor characters”.

The difference between these two images is the distance travelled by William Dalrymple’s The Anarchy, a graphic retelling of the East India Company’s “relentless rise” from provincial trading company to the pre-eminent military and political power in all of India. The company’s transition from trade to conquest has preoccupied historians ever since Edmund Burke famously attacked it as a “state in the disguise of a merchant”. Building on foundational research by CA Bayly, KN Chaudhuri and PJ Marshall among others, a new cohort of scholars writing in the wake of the financial crisis (Emily Erikson, Rupali Mishra, Philip Stern, James Vaughn) have studied the company as a forerunner of modern multinationals, intertwined with the modern state and “too big to fail”.

Dalrymple’s first achievement in The Anarchy is to render this history an energetic pageturner that marches from the counting house on to the battlefield, exploding patriotic myths along the way. Thus Robert Clive, once celebrated as “Clive of India”, enters here as a juvenile delinquent from Shropshire who arrived in Madras in 1744 as an 18-year-old clerk, but found his vocation as a thuggish fighter in the company’s small security force.

Miniature of Jahangir, with James I in white, below. Photograph: The Picture Art Collection/Alamy

As to the Battle of Plassey of 1757, which won the company control of Bengal and which generations of British schoolchildren would memorise as a glorious imperial victory, the real story was substantially more complicated. The volatile, widely disliked Nawab of Bengal, Siraj ud-Daula, had made an intractable enemy of Bengal’s Marwari bankers, the Jagat Seths, who saw better prospects in investing with the East India Company than supporting him. The Jagat Seths offered the company more than £4m (about a hundred times that in current terms, reckons Dalrymple) to unseat Siraj ud-Daula and install a compliant collaborator in his stead. Clive, who stood to make an immense personal fortune, gladly accepted. Plassey was in truth a “palace coup”, executed by a greedy opportunist, won by bribery and betrayal.

It took six months in those days for news to travel from Calcutta to London, and even when it arrived, few really understood what was going on in Bengal. “Was it true,” asked one company director, that “Sir Roger Daulat” was a baronet? What the directors did understand they did not much like, since taking on territory meant taking on risk and expense. Meanwhile a snobbish disdain for the extravagance of the “nabobs” (Clive foremost), and fear about their corrupting influence on British politics, led to a Regulating Act designed to bring the company under tighter parliamentary control. The man picked to run a cleaner administration was the “plain-living, scholarly, diligent and austerely workaholic” Warren Hastings, who spoke several South Asian languages, had a “deep affection for India and Indians”, and sponsored serious scholarship on Indian culture. But Hastings’s “rule was as extractive as ever”, and his ruthless tactics towards the company’s Indian subordinates got him spectacularly impeached in 1787. Governors-general after Hastings would be no less violent – just far more racist.

However well-known these events may be to some – thanks not least to his own work – Dalrymple’s spirited, detailed telling will be reason enough for many readers to devour The Anarchy. But his more novel and arguably greater achievement lies in the way he places the company’s rise in the turbulent political landscape of late Mughal India. It was contemporary Indian chroniclers who called this period “the anarchy”, due to the waves of invasion and civil war that shook Mughal power and allowed a host of regional actors – of which the company was merely one – to gain ascendancy.

Dalrymple brings the insights of years of living in Delhi and immersing himself in Indian art, archives and historical sites. He draws on reams of scarcely used documents in Persian, Urdu and other languages (unearthed by skilled researchers and translators) to animate characters such as the brilliant Mughal general Najaf Khan, the vengeful Rohilla prince Ghulam Qadir, and the canny Maratha statesman Mahadji Scindia. He has a particular talent for using Indian paintings as historical sources, a skill complemented by the volume’s sumptuous illustrations. And nobody sets a scene as well as he does, whether scoping out an enemy fleetthrough an informant’s spyglass, or watching the waterlogged bodies of famine victims floating down the Hooghly river, or roaming the rubbished and ruined streets of ransacked Delhi.

Miniature of Lord Clive of India. Photograph: The National Trust Photolibrary/Alamy

Underscoring the centrality of Indian actors to this history, he ends The Anarchy not with a bureaucratic milestone, such as the company’s loss of its monopoly in India in 1813, but with a highly symbolic one: its conquest of Delhi in 1803. “We are now complete masters of India,” declared a general. The emperor Shah Alam, the tragic hero in a book rife with villains – a figure who had witnessed the Persians sack Delhi, battled against Clive, survived an assassination plot, the rape of his family, and a hideous blinding – would live out his remaining few years as a pensioner in the Red Fort, where he dictated “the first full-length novel in Delhi Urdu” about “a prince and princess tossed back and forth by powers beyond their control”.

Dalrymple steers his conclusion toward a resonant denunciation of corporate rapacity and the governments that enable it. This story needs to be told, he writes, because imperialism persists, yet “it is not obviously apparent how a nation state can adequately protect itself and its citizens from corporate excess”. And it needs to be read to beat back the wilfully ignorant imperial nostalgia gaining ground in Britain and the poisonously distorted histories trafficked by Hindu nationalists in India. It needs to be read because with constitutional norms under threat in both countries, the defences seem more fragile than ever.

• The Anarchy: The Relentless Rise of the East India Company is published by Bloomsbury (£30). To order a copy go to guardianbookshop.com or call 0330 333 6846. Free UK p&p over £15, online orders only. Phone orders min p&p of £1.99.