Growing up watching Bollywood movies, I obviously have an affectionate bias towards the genre. Just thinking about them triggers my nostalgia and happy times (thinking about Swades, Dil Chahta Hai, 3 Idiots etc makes me happy). But I think it's a bit more than just nostalgia and good ol' times. Cause after all, I felt the same feeling of happiness and ambition when I first watched them and there was no reference of nostalgia to begin with.
Contemporary Western movies, especially Hollywood ones, focus on reflecting the real life through the lenses. (Spoilers ahead) The recent Joker, a brilliant movie, takes a fictitious character and applies all the real-life values to it. Conversations about how the movie portrayed depression and manic in a realistic manner abound. Interstellar - a science fiction about a NASA astronomer traveling into a wormhole. Instead of focusing on the creative aspect of the movie, the Internet got engulfed in the scientific accuracy of the movie. How "realistic" it was.
In contrary, Bollywood movies focus on bringing your daydreams to life. They indeed give you the escape from the monotonous daily life. Take for example, 3 Idiots - a story of university friends and their exciting shenanigans, then a friend getting mysteriously estranged, only to come full circle to get reunited with a happy ending. Sure, it does mention important topics such as student suicides and the academic pressure but the whole theme is eventually a positive one. Or take Swades - a NASA engineer, leaving the comfort of life in the US and going on a road trip in India to find a woman who took care of him when he was little and then changing the lives of villagers while doing so. Most people's daydream is always positive and Bollywood movies play into that positivity.
Westerners know very well about the sudden song-dance segments of every Bollywood movie. The over-dramatic, over-sensationalized choreographed dance routine where the lovers are professing their love to each other. Unrealistic? Sure. But it conveys the feeling of happy turmoil that one feels when first falling in love. Even the fight scenes (especially in Tollywood movies) - over the top punches and kicks. The hero gives a weak punch and the stunt actor jumps off the ground to only end up on the windshield of a car standing 20 feet from the hero. The audience knows it's obviously not realistic but still enjoys that fantasy. The whole sequence is very similar to how we played as kids and still fantasize about from time to time - to be a hero that takes up on couple of bad guys. And this is what makes Bollywood movies into Bollywood movies. Giving us a glimpse of our daydreams of what live can be and could have been. What we can achieve and become, whether it's possible or not. But at least we can imagine.