If I say the idli was brought to southern India by Arab settlers, it could raise hackles, especially among South Indians. But the truth cannot be suppressed. References to the modern way of making the idli appear in Indian works only after 1250 CE.
K.T. Achaya, the food historian, speculates that the modern idli might have originated in the region that is now Indonesia, which has had a long tradition of fermented food. According to him, cooks employed by the Hindu kings of the local kingdom may have invented the steamed idli there, and brought the recipe to India during the period 800-1200 CE. But this theory is being questioned by modern food historians such as Lizzie Collingham, Kristen Gremillion, Raymond Grew, Makhdoom Al-Salaqi (Syria), Zahiruddin Afiyaab (Lebanon). References available at the Al-Azhar University Library in Cairo also suggest that Arab traders in the southern belt brought in the idli when they married and settled down in those parts. Now the question is: how did that happen? It is known that Arab traders used to come to the southern coast for trade, and that pre-dated even the advent of Islam. The first mosque outside the Arab peninsula was erected by Arab settlers who came here as traders.
The Arab settlers were strict in their dietary preferences; many of them came here when Mohammed was still alive and they were neo-converts to Islam from Paganism. They insisted on halaal food, and Indian food was quite alien to their palate. To avoid all such confusion regarding what is halaal or haraam in food, they began to make rice balls as it was easy to make and was the safest option available. After making the rice balls, they would slightly flatten them and eat with bland coconut paste ( Encyclopaedia of Food History , edited by Collingham and Gordon Ramsay of Britain, Oxford University Press, and Seed to Civilisation, The Story of Food , by Heiser Charles B, Harvard University Press, 1990). Later it was improved upon, and from the 8th century onwards, the idli in its modern avatar came into existence.