There may be quite a few reasons for this

• There are not many bands that perform music on a large scale, at least not till recently
• Peer Pressure, everybody is doing it
• Pressure from Producers / Distributors
• If Songs become a huge hit and even if the movie is not that great it can still fetch the producers and distributors enough money (Eg The movie 3).
• The legacy left over from the 1950s, it just refuses to go away .

Musicals from Hollywood are popular. They aren't as popular as they were in the 40s, 50s, and into the 60s, but they do still exist.

Some recent examples, just off the top of my head:

• The Muppets (2011)
• Across the Universe (2007)
• The Producers (2005)
• Chicago (2002)

And of course, many children's movies have musical numbers, song, and dance, like the Shrek series, and most animated Disney movies I've seen.

Of course it's still true that musicals from Hollywood aren't as popular as those from Bollywood. But that's mainly the result of what sells in the target markets for each country.

Musicals do sell in the U.S. (or they wouldn't keep making them), but they don't sell as well as they do in Indian markets.

Historical, social and psychological

Hi, in my opinion, Bollywood films are not just simple company products. Based on the local Indian culture, film and the way that people appear in it is like a part of their life. According to a 2005 world bank estimate, 41.6% of the total Indian population falls below the international poverty line of US$ 1.25 a day (PPP, in nominal terms 21.6 a day in urban areas and 14.3 in rural areas).

It can be like a sweet dream for them: when they do not have that kind of entertainment in their reality, they escape to the film world and (based on Freud's ideas) they enjoy gazing at films like the daily life.

It has happened to all of us: we have some sweet dreams that we could not find in reality so we send the dream to our unconscious mind and live with it or hide it. In sociological terms, it is a two-way interaction between Hindi films and Indian taste. This method of film making has quite a long history and when we search in Hinduism history, we can find singing and dancing in their culture.

All this is the best reason and it is better to advertise in a family acceptable film style which they produce, it can be the attractive point. From a cinematic viewpoint, it is easier to think about dance and song in different parts more than creating a (Appeal of Character style) of film.

Apart from being a popular format to make films, songs are included nowadays for primarily two reasons:

Film promotion Go to any music channel and you will see endless repeats of songs mostly from upcoming films. Same goes for radio. If my film does not have songs, then I cannot use this medium of promotion at all.

Hence even films which don't warrant a song, will have an item number somewhere or towards the end of the film.

Alternate source of revenue If the music of the film is good, many films will recover a substantial cost of production by selling the music rights. This gives the producers a cushion to minimize their losses if the film doesn't do well - which happens to a number of films.