It’s a rare Hollywood tale that has roles for Steven Spielberg, India, warring billionaire brothers, hedge funds and the power shift from West to East.

Some moving parts, for sure, yet DreamWorks SKG’s flirtation with Bollywood may be fodder for Shakespeare, never mind Tinseltown writers. The plot: DreamWorks and billionaire Anil Ambani are reportedly in talks for the Reliance Anil Dhirubhai Ambani Group to invest as much as $600 million in the studio.

US pundits are preoccupied by how Mumbai-based Reliance could offer DreamWorks a happy-ending exit from Viacom Inc.’s Paramount Pictures. The bigger story is what the deal would say about the US and Indian economies and how both nations can learn from the other.

One important subplot is where the money is these days. The hedge funds that put up cash for films like Lions for Lambs, starring Tom Cruise, were unimpressed with the returns. The fallout from the subprime-loan mess has these formerly high-flying investors on the defensive. The US economy is skirting recession, limiting Hollywood’s financing prospects.

India, by contrast, is booming. and few forces are more emblematic of that than Bollywood. Reliance Big Entertainment last month said it would consider financing films for eight Hollywood production companies promoted by actors and directors, including George Clooney, Nicolas Cage, Tom Hanks, Brad Pitt, Chris Columbus, Jim Carrey and Jay Roach.

Looking abroad

As much as that says about India’s ambitions, it may speak to the paucity of big investment opportunities at home. Ambani, ranked by Forbes magazine as the world’s sixth-richest man, built his business through acquisitions, partnerships and setting up radio stations after parting with his elder brother Mukesh Ambani in 2006. Many Indian tycoons are increasingly looking abroad for opportunities.

Another angle worth mulling over is how Hollywood can learn from Bollywood. Both suffer from DVD piracy, yet Bollywood’s business model may be more sustainable than the US’, where actors such as Bruce Willis and Julia Roberts, make tens of millions of dollars per film. Piracy is partly a rebellion against a system of high ticket prices and arrogance.

India produces more than 800 movies a year on budgets that are a fraction of many Hollywood projects. While quality is important, one wonders if the US film industry could learn from India’s celluloid thrift.

Soros’s cameo

There’s even a cameo in this script for George Soros, who is among those betting on the fastest-growing major economy after China. In February the billionaire bought a 3-percent stake valued at $100 million in Reliance Entertainment.

Soros is, no doubt, intrigued by Reliance’s uniquely ambitious plans, which include telecommunications, entertainment and financial services. India is likely to have 128 million households with televisions by 2010, up from 105 million in 2005, according to a 2006 study by PricewaterhouseCoopers Llp. and the Federation of Indian Chambers of Commerce and Industry.

India is a no-brainer of an emerging market for Spielberg and his ilk. It boasts a market of almost 1.2 billion people, a growing middle-class consumer sector and a vast English-speaking population. The US market, meanwhile, is an obvious destination for Indian content.

It’s no mystery why studios such as Sony Pictures Entertainment and Walt Disney Co. have signed deals with Indian entertainment companies. Mumbai-based UTV Software Communications Ltd. co-produced filmmaker M. Night Shyamalan’s latest movie, The Happening.

Spielberg’s role

Hooking up with Spielberg, the highest-grossing filmmaker of all time, would be quite a coup for Reliance. It would allow the company to make a grand entrance into an industry it has been trying to muscle into in recent years.

Reliance investing in DreamWorks would be a microcosm of what’s unfolding in the global financial system: Rich economies, such as the US, need Asia’s money while this region’s developing economies need US markets.

India’s $306-billion stockpile of currency reserves pales in comparison with China’s $1.7 trillion or Japan’s $970 billion, much of which is parked in US Treasuries. That holds down borrowing costs in the biggest economy, providing demand for Asian goods, although it’s a shrinking market at the moment.

There are risks, of course. All that liquidity is creating control problems amid surging food and energy costs for officials in New Delhi. Wholesale prices jumped 11 percent in the week to June 7, after gaining 8.8 percent in the previous week.

‘Difficult times’

Prime Minister Manmohan Singh increased retail prices of gasoline and diesel this month, joining China, Indonesia, Malaysia and Sri Lanka, as a near-doubling of crude-oil prices pushed up costs and threatened to erode profits of companies such as Indian Oil Corp.                

That may make the government less popular before elections due by May 2009 and force the central bank to further raise interest rates.

“These are difficult times,” Finance Minister Palaniappan Chidambaram said on June 20 in a performance drenched with understatement. “Naturally, we will have to look at stronger measures on the demand side and on the monetary side.”

Short-term challenges aside, India’s potential is hard to ignore. Bollywood’s biggest investment in Hollywood may lead to many sequels in the years ahead.

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