Close upon the astounding success at the Golden Globes of Slumdog Millionaire, a movie with an Indian cast, Indian heart, Indian music director, Indian language dialogues and a BRITISH DIRECTOR, one if forced to ask why movies directed by Indians have never done so well outside India. India has had directors such as Satyajit Ray, Shyam Benegal and Adoor Gopalakrishnan who have brought home international honours, but they never managed to mix commercial success with critical acclaim.
I don't think it has anything to do with 'realism' pure and simple. Many Hollywood productions are unrealistic. Gladiator won 5 awards in 2000, including the one for best picture. I wouldn't call Gladiator a realistic movie, though Hollywood's fantaises and fighting scenes are usually a lot more realistic than Bollywood's (of Tollywood's or Kollywood's for that matter). Crouching Tiger and Hidden Dragon is not particularly realistic, but it also won international acclaim.
Could it be the music in Indian movies that ruins them for western audiences? Indian movies have always been popular in the middle-east, Africa and the Soviet Union. However, they have never had the sort of popularity which Chinese movies have had. Go to any Indian movie screening in the UK or the USA and you will find that the audience is primarily desi.
Amitabh Bachchan has said that Slumdog Millionaire has done well solely because it "projects India as Third World dirty under belly developing nation and causes pain and disgust among nationalists and patriots". Bachchan adds that "a murky under belly exists and thrives even in the most developed nations." I'm sure that Bachchan has a point, but movies such as American Beauty have probed the underbelly of the West. Also, I got the feeling that like many upper class Indians, Bachchan does not like the idea of India's warts (they are aplenty) being exposed outside India. Slumdog Millionaire is a realistic portrayal of a slice of India, an India ignored by most upper class Indians.
Why haven't Indian movies like Lagaan (one of the best Indian movies to date) done well outside India? Is it because they are made primarily with an Indian audience in mind while Chinese movies like Crouching Tiger, Hidden Dragon are created for an international audience? I have little doubt that Slumdog Millionaire was also made for an international audience.