Chinese handset makers may have to set up servers in India

The Indian government may ask foreign handset makers to set up servers in India to ensure the protection of user data, following concerns about security breaches, especially as most Chinese smartphone vendors – who dominate the Indian market - have servers in their home country.

According to The Economic Times, officials in the electronics and IT ministry said while the issue of apps sweeping up too much user data was worrying, the broader issue was the security of information that could be going to third parties outside the country.

''There have been voices raised for the past several years that by virtue of servers being outside of India … data processing has become the new field (of commercial exploitation),'' an official told ET.

The government has already asked 21 smartphone companies, most of them Chinese, for protocols used by them by 28 August to ensure the security of mobile phones sold in the country.

Chinese handset makers led by Xiaomi, Oppo, Vivo, Lenovo and Gionee account for more than half of India's $10 billion smartphone market, with most of these companies having servers in China.

Xiaomi has its servers in Singapore and the US.

Another official highlighted the twin issues that the government is trying to address through its directive to the smartphone companies. The first is that the data being collected from users after their consent through apps is disproportional to what's needed to enable such functions.

''Some entities are getting far more data, which is being used for commercial monetisation purposes, which is wrong and needs to be solved,'' the person said.

The second is that of data gathered without authorisation and used outside the country, he said.

The government's directive on smartphones, coming amid heightened tension on the border with China, is part of a wider move to prevent any crippling cyberattacks that could be launched on the country's telecom and power transmission sectors.

Reports said India has also objected to Chinese firm Shanghai Fosun Pharmaceutical Group's proposed $1.3 billion buyout of Gland Pharma. Besides that, India recently imposed antidumping duties on 93 Chinese products.

This though won't be the first time that India has asked foreign companies to set up local servers. The telecom department had in 2008 asked Canadian smartphone maker BlackBerry to shift some of its servers to India to address concerns of security agencies that wanted to monitor emails. The company eventually set up a server in Mumbai in 2012 to facilitate this.

The government's latest move has come amid tension on the border with China and concern over growing imports of IT and telecom products from the neighbouring country on the grounds that this could potentially allow backdoor access to critical information.

A recent Confederation of Indian Industry study said that Chinese investment in India's electronics and information technology products sector is worth nearly $22 billion.