Bollywood is the world's largest feature film producer. In 2001 it produced 1,013 films.
British Culture Secretary Tessa Jowell plans to open negotiations with Indian Film Minister Shri Jaipal Reddy to enable the industries to share resources and expertise.
Indian filmmakers would be encouraged to invest in British talent and locations. In return they would benefit from British film making expertise and could be eligible for British film tax incentives.
"Bollywood is the most impressive and spectacular film industry in the world. Like the U.K. film industry, it has a rich heritage of producing entertaining, challenging and culturally relevant cinema," Jowell said.
"It makes sense for our industries to join forces so that we can raise our game even further."