Bollywood is facing a financial crisis — but do recessions make for better cinema?

India may be crazy for what much of the country call “the talkies”, but a recent string of flops and a slump in audience figures has the country’s film industry in a tizzy. The latest numbers read like a horror script: box-office takings plummeted by more than 90 per cent last month year-on-year, according to IBOS, a website that tracks Bollywood’s commercial health.

The slump was largely due to a stand-off between producers and the owners of India’s multiplex cinemas over how ticket revenues are split. The producers wanted 50 per cent; the cinema owners said no, claiming that the high proportion of poorly performing Bollywood films pumped out in recent months meant they could not afford such a deal. A two-month boycott of India’s largest cinema chains by the country’s leading producers ensued. The resulting drought of new releases ended when the two sides formulated a new revenue-sharing formula last weekend.

The cinema owners had a point: nine out of ten multiplexes in India are thought to be loss-making and Bollywood has been making a lot of lousy films of late. Take 8x10 Tasveer, a supernatural thriller starring Akshay Kumar, one of India’s most popular – and until recently most bankable – action heroes. Released to poor reviews on April 3, the final day before the boycott, it has grossed about £1.7 million.

That’s about twice as much as the recent average Bollywood flick, according to IBOS, but desperately disappointing given Mr Kumar’s track record. According to IBOS figures four out of five recent films have flopped in similar fashion. This year Bollywood is yet to produce a bona fide blockbuster. What accounts for the proliferation of flops? One possible explanation is the sudden tidal wave of cash that engulfed India’s film industry when the global economy was booming. The influx of funds is well illustrated by how $700 million flowed into Bollywood from abroad in 2008 — a fivefold increase on 2007, according to Thomson Reuters, the financial data provider. Even more was raised on stock markets in Mumbai and London.

With so much money sloshing around actors’ wages soared while quality thresholds sank, many in the industry now admit. “Put it this way: a lot of films got made that nobody would have missed if they hadn’t,” said Subhash K. Jha, one of India’s leading film journalists.

But there may be brighter times ahead for India’s film buffs. A mere $25 million has flowed into the industry from overseas this year. Ernst & Young reckon that financial constraints mean that about a third fewer Bollywood films will be made this year than last. If the cinema-going public is lucky and the movie moguls achieve their objectives, it is the weakest projects that will be culled before they get to the studio floors. “We are thinking much more carefully about what films get made,” Ronnie Screwvala, a prominent Bollywood producer, told The Times. “The industry is correcting itself.”

Which leads us back to our original question: do recessions make for better cinema?

The jury is out, but the trajectory of certain careers might suggest that economic slumps do indeed foster creative brilliance. Take that of Martin Scorsese. Its highpoints – arguably — were Mean Streets, released in 1973, when an oil price shock triggered a Wall Street crash, and Taxi Driver in 1976, a year of sluggish economic growth in the US and a sterling crisis in Britain. A Scorsese film like the Departed, which was made in 2006, one of the global economy’s go-go years, can’t hold a candle to them.

The most recent British example of austerity leading to success is the critically acclaimed Slumdog Millionaire. A product of the credit crunch, it was made for a mere £15 million and went to take more than $350 million. Could a Golden Age of Bollywood be beckoning?

Times Recommends

• Found: the clue to van Gogh’s ear
• Freud saved by Nazi admirer
• Abramovich woos stars with £3m bash