Bollywood, India’s gargantuan film industry, is known for its big-budget, colour-saturated musical numbers that are scattered through every movie. Dotted within each tale of star-crossed lovers, historical rivalries or family dramas is a surreal sequence where dozens of dancing extras enter the frame, characters burst spontaneously into song and locations shuttle from the Egyptian pyramids to the Swiss Alps, London streets or even space.

Yet, in recent years, this escapist function of Bollywood has been failing to capture its audience. The most expensive Bollywood film in 2018, the 19th-century action-drama Thugs of Hindostan, was made on a budget of 300 crore rupees (£32m) but took in only half that at the box office, with owners of some Indian cinemas demanding refunds.

Film-makers are increasingly turning away from spectacle and towards realist narratives, creating a burgeoning independent Indian cinema, with films such as Chaitanya Tamhane’s 2014 film Court focusing on India’s judicial system, Neeraj Ghaywan’s Masaan (2015), tackling the caste divide, and 2018’s Love Sonia telling the story of sex trafficking in India.

“There’s already an appetite for more gritty, realist film-making in India,” says director Zoya Akhtar, “but there’s never enough critique of Indian society happening here.” Akhtar’s latest film, Gully Boy, aims to further the realist narrative of Indian cinema by disrupting its fascination with musical numbers and subverting the system from within – the production stars two of Bollywood’s biggest actors: Ranveer Singh and Alia Bhatt.

Gully Boy is a fictionalised account of the burgeoning hip-hop scene in Mumbai. Gully, or “gutter”, rap is a musical sub-genre made by the younger people who live in the sprawling slums of the city; its aesthetic is DIY and its lyrics tackle everything from police brutality to the caste system and even the brutal gang rape of a Delhi woman in 2012.

A stark contrast from both the commercialised rap of the US and the party-starting optimism of most Bollywood chart hits, Akhtar’s film comprises rap songs and battles composed entirely of gully rap. It is Bollywood’s first hip-hop film.

Akhtar, one of Bollywood’s few female directors, first came across the gully community while editing her last film, Dil Dhadakne Do in 2015. “My editor was watching a video on his phone by this kid called Naezy; it was his track Aafat,” she says, “and I loved how raw and how authentic it felt.”

The video shows Naved Shaikh, AKA Naezy in Khatarnak, Mumbai, an area notorious for gang violence, as he raps about brushes with the police and his frustrations at an unequal society. Akhtar became a fan.

“I then spent a year talking to Naezy and his collaborator Divine,” Akhtar says. “I went through the streets with them, meeting their families and girlfriends, and I realised I had to do something with this story.”

The result is Akhtar’s fourth feature film, and in the three years it has taken her to make the movie, the gully rap scene has exploded across India. “The music’s on the cusp of really becoming big,” she says. “Indian film music is the biggest genre but this could be a real challenge to its dominance.”

Rapper Vivian Fernandes, AKA Divine, has also seen a shift in the perceptions of gully rap since he and Shaikh started making music. “People who live here had never heard their lives represented in a song and they are connecting with gully,” he says. “It’s coming from the people, for the people and it’s going to be the biggest genre of our country. I’m already seeing kids in villages rapping in dialects of Gujarati, Marathi and Tamil. It’s something I never thought I’d see – when I started, there was no one even rapping in Hindi.”

Growing up in Khatarnak, Fernandes was introduced to hip-hop through a pirated CD made by a friend, and was hooked. “I realised that Bombay didn’t have a sound when it came to independent music – it was all Bollywood – so I started using our local slang and rapping over free beats to make our Bombay music.”

Fernandes lived around the corner from Shaikh and they developed the gully sound together, culminating in their crossover hit Mere Gully Mein (In My Hood) in 2015. The track has since amassed almost 15 million views on YouTube.

Both Fernandes and Shaikh have acted as musical supervisors on the film, contributing to a soundtrack that also features British-Indian producer Rishi Rich and new gully rappers from around India.

“The process of making this film was very different from anything else I’ve done,” Akhtar says of filming in the Mumbai slums. “It was an incredible experience. The people there were amazing and so helpful, they were happy their story was being told.”

Akhtar sees the film disrupting the norms of Bollywood and also having political weight. “India is very deeply entrenched in the class system,” she says, “and I want people to understand how it works and how it oppresses people. I want them to understand that art transcends class, and I want them to listen to real hip-hop because these artists are speaking their truth.”

Similarly, Fernandes looks at both his music and the film as a means of “telling my story and showing kids who might feel they need to settle for a nine to five that there is another, more creative life available to them”. With one of the fastest-growing middle-class populations in the world, this is a controversial message in a culture that still prioritises vocational stability over creativity.

Yet, for Akhtar, star power will overshadow any controversy. “We’re using extremely popular actors to tell a narrative that wouldn’t normally be for a mainstream audience, and that’s what will sell it.” With the film already scheduled for a European premiere at the Berlin international film festival, Gully Boy may well shift perceptions of Bollywood globally.

With or without Bollywood’s endorsement, though, Fernandes believes the gully rap movement is unstoppable. “There’s so much underground music in our country, and lots of it hasn’t even been discovered yet,” he says. “We don’t need Bollywood to make hip-hop big. Bollywood needs us.”

• Gully Boy is released on 14 February