Earlier quoted context omitted.
Ignoring that the film industry in India is popularly called Bollywood, in honor of Hollywood.
It's nicknamed "Bollywood" by people in the US. In India, it's referred to as "बॉलीवुड".
"Bollywood" was invented & popularized in Bombay-based film trade journals in the 1960s & 1970s. It was an explicit reference *by the Indian film industry there to Hollywood. It was additionally a play on “Tollywood" for the Tollygunge-based cinema of West Bengal, which had been called that since the 30s.