Islamic finance is no longer confined to a handful of Muslim-majority nations. Today, it operates in more than 80 countries, spanning over both Muslim and non-Muslim regions—from Malaysia and the UAE to the United Kingdom, Singapore, and South Africa. Over 600 Islamic banks and financial institutions are actively participating in this fast-growing sector, proving its acceptance and viability across diverse economies.
Globally, the Islamic finance industry has reached a valuation of 5 trillion USD, and projections indicate that it will surge to nearly 9.75 trillion USD by 2029. These figures clearly reflect that Islamic finance is not only stable but also possesses tremendous market potential at the international level.
India, too, stands on the threshold of benefiting from this economic trend. With one of the world’s largest Muslim populations, India holds a natural advantage. The 2011 Census recorded 172.2 million Muslims, and estimates suggest that by 2025 the number has crossed 200 million. This vast demographic forms a ready-made market for Islamic financial products, particularly for interest-free banking, ethical investments, and asset-backed economic models.
Adding to India’s advantage is the fact that the Indian corporate sector is already broadly compatible with Shariah investment norms. According to the Dow Jones Islamic Index, nearly 60–70% of companies listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) meet the criteria for Shariah-compliant equity investment. This compatibility indicates that India’s financial ecosystem requires only minor regulatory adjustments—not a structural overhaul—to welcome Islamic finance.
Sri Lanka offers a successful example for India to consider. By introducing a simple amendment in 2005 to its Banking Regulation Act No. 30 of 1988, the Central Bank of Sri Lanka opened the door for Islamic banking. Today, the Islamic finance market in Sri Lanka is valued at 634 million to 907 million USD, showing how receptive regulatory frameworks can stimulate economic growth. The country achieved this milestone merely by accommodating an alternative financial system within its existing structure.
If India adopts a similar approach—by making minimal, cosmetic amendments to its financial regulations—it has the potential to emerge as the hub of Islamic finance in South Asia. Such a move would not only attract investments from West Asian and Southeast Asian nations but would also fulfil the aspirations of many neighbouring countries that envision India as a regional leader in this field.
As the 4th largest economy in the world, India must continue exploring new financial avenues to strengthen its global position. Embracing Islamic finance is one such opportunity. It promises enhanced financial inclusion, diversified investment channels, and a boost to India’s GDP.
To secure long-term economic resilience, India must look beyond conventional frameworks and welcome innovative and ethical financial alternatives. Islamic finance, with its proven global success, offers exactly that an opportunity waiting to be seized.