Percept Holdings, a media and entertainment company, is constructing the theme park at an initial cost of $100 million in a sign of the growing taste for merchandising in an industry evolving from family firms to Hollywood-style companies.
"Bollywood is what the Indian masses turn to for entertainment," said Shailendra Singh, a top official of Percept Holdings which is building the park in Mumbai, India's cinema and entertainment capital.
"Bollywood accounts for over 40 percent of the total revenues of the overall Indian film industry, but there is no organised format or means to consume this experience."
The theme park, due to open in 2008, will have Bollywood cafes, a hall of fame, museums, Bollywood rides, sets, shoot visits and simulator experiences.
Despite being so prolific - Bollywood makes more than 800 films a year - the industry's revenues stand at half of what the Walt Disney studio made in box office revenues in 2006.
But studios and analysts say the industry is aiming at following Hollywood with "media convergence" - the buzzword for plastering products across an array of media such as television, the Internet, video games and mobile phones - to raise revenues.
Revenues from India's film industry, valued at about $1.75 billion in 2006, are forecast to nearly double to $3.4 billion by 2010, according to estimates by PricewaterhouseCoopers.