Studio revenues in India are predicted to double over the next five years as the territory begins a period of rapid growth, both in terms of cinema infrastructure and production investment.

According to a new report, Bollywood: India's Film Industry, from UK-based industry analysts Dodona Research, production investment will rise 70% over the next five years, Indian film industry export revenues will climb 120% over the same period and foreign films' theatrical rentals in India will also rise steeply.

Dodona's confident predictions come as the Indian government moves to corporatise the film industry in line with other sectors such as IT and telecommunications. In 2000, the country produced over 800 films for a total cost of around $300m.

The government has also been improving access to bank finance and reforming taxation laws to encourage exports, which have already seen a gradual improvement in recent years to markets such as the UK, the US and the Gulf states, among others.

The country's exhibition sector is also set for explosive growth after some false starts from overseas operators such as Warner Bros. and United Cinemas International.

The government is encouraging modernisation of the country's 9,000 permanent cinema sites (there are also 3,000 mobile cinemas) with the reduction of the punitive entertainment taxes, especially for new builds, and to attract international investment, the cutting of import duties on cinema equipment.

The Dodona report also warns that despite its population - and 3 billion annual cinema admissions - India does not necessarily lend itself to a megaplex culture. With urban congestion, multi-screening of existing halls and the development of smaller multiplex cinemas are more viable options in most locations.

Local operators are already refurbishing and upgrading venues, and although screens are not expected to grow rapidly, box office is expected to rise in line with the higher ticket prices being introduced by modernised venues. Dodona predicts that gross box office will jump from $1.67bn in 2000 to $2.64bn in 2006.

Changes in the market will mean that foreign - predominantly US - films will benefit disproportionately. Against theatrical rentals of $20 million in 2000, by 2006 foreign films' rentals in India could reach $44 million.

"Part of the opportunity is not only to sell films but also to make them," said Dodona MD Karsten-Peter Grummitt. "Sony and Fox are already looking to become good corporate citizens, and feed their satellite channels. In the long run India is going to be a much bigger market, and companies that integrate themselves into the local industry will benefit most."