Hakeemul Ummah Hazrat Moulana Ashraf Ali Thaanwi Sahib رحمه الله has said that an Aalim is one who is an expert of the Ahkaam (the laws of Deen). He is not necessarily an expert of the Arabic language. Abu Jahl, despite being an expert in Arabic, remained Abu Jahl (the father of ignorance). The meaning of an Aalim is he who possesses the appropriate knowledge of the laws of Deen and a person who is a practical observer of the Shariah. One who is not so is not included in the assembly of the Ulama (plural of Aalim). In Egypt, Beirut, etc there are Jews and Christians who are experts of the Arabic language. An Aalim is one who along with the علم (knowledge) of the Deen is a Muttaqi. He has fear for Allah Ta‘ala جل جلاله and is a repository of moral excellence. He is a follower of the Sunnah.
(SOURCE: MALFOOZAAT OF HAZRAT MOULANA ASHRAF ALI THAANWI SAHIB رحمه الله, PART 6)