An Indian farmer takes a selfie on a smartphone in Jaipur on Jan. 9, 2019. Photo: AFP/Vishal Bhatnagar/Getty/AFP

MUMBAI – India, one of the world’s largest markets for digital consumers, plans to enforce a new national security directive telecom experts believe is aimed at blocking Chinese equipment suppliers like Huawei from its 5G rollout.

The directive aims “to safeguard its 5G plans and maintain the integrity of supply chain security and discourage insecure equipment.”

The government said the directive is not aimed at any particular nation but analysts say the move is consistent with other measures imposed to move away from Chinese equipment suppliers after China’s incursions into and occupation of parts of Ladakh.

In the past, local companies said telecom giants Huawei and ZTE Corp were among the preferred companies to help set up their 5G networks. The Chinese companies already provide critical equipment to Indian telecom companies Bharti Airtel and Vodafone Idea.

The new measures won’t apply to existing contracts, officials said. Telecom and digital services provider Reliance Jio uses equipment from South Korea’s Samsung.

India’s vast potential digital market is just coming online. Image: Facebook

India is understood to be joining efforts by the US and Japan to design and build 5G networks without China’s involvement. Losing India’s vast market potential would be a potential big blow to both Huawei and ZTE.

Reports suggest the US, after putting restrictions on these companies at home, has been urging other Five Eyes intelligence-sharing allies, namely the UK, Canada, Australia and New Zealand, to do the same.  

The new security directive comes as the government announces plans to auction spectrum for commercial mobile services. The auction will be for spectrum in various frequency bands between 700 MHz and 2,500 MHz. The validity of the spectrum is for 20 years, and the government has set a reserve price of 3.92 trillion rupees (US$53 billion).

Getting spectrum is critical for all three leading telecom providers – Reliance Jio Infocomm, Bharti Airtel and Vodafone-Idea – as earlier purchases come up for renewal or if any company aims to upgrade to 5G.

Reliance Jio chairman Mukesh Ambani said his company plans to launch 5G by the second half of 2021, while Bharti Airtel chairman Sunil Mittal expects to launch in two to three years.

“China, being the key exporter of telecom hardware across the globe, is likely to be impacted,” said Rajnath Yadav, a research analyst at Choice Broking in Mumbai in referring to the directive. “In the domestic market, it will be a concern for incumbent companies such as Bharti Airtel and Vodafone Idea, who use Chinese equipment.

Jio plans to launch 5G by the second half of 2021. Photo: Indranil Aditya/NurPhotoAFP

“However, these companies have taken several steps in the past six to nine months to get a substitute for the Chinese equipment.”

Over the next six months, the government will declare a list of so-called “trusted sources” and “trusted products.” Some analysts suggest the government could be using the announcement to leverage its bargaining position with China.

Under the new rules, telecom companies will be able to use new equipment that has been certified by a National Cyber Security Coordinator as a trusted product.

India’s Deputy National Security Advisor will head a National Security Committee on Telecoms to decide on the list of trusted sources and products, which some speculate will give preference to locally made equipment.

China already faces rising hurdles in India. In July, New Delhi restricted foreign direct investment (FDI) from countries with land borders with India without naming any country, though China is the only one to make significant investments in the country.

In February, India put restrictions on China investing in local banks without prior approval. After the Ladakh incursions, India shut out Chinese infrastructure companies from local projects.

In June, citing security concerns, India initially banned 59 Chinese apps, including the hugely popular Bytedance’s Tik-Tok and Alibaba’s UC Browser, and followed up with bans on another 47 apps in July. India banned another 118 in September, including PUBG, and 43 more in November.  

China has protested against the bans and has said it wants them revoked. Beijing has said it has always required overseas Chinese companies to abide by international rules and operate in compliance with local laws and regulations.

China has said it hopes that India will provide an impartial and non-discriminatory business environment for all market players from countries including China, and rectify the “discriminatory’’ practices it says violate World Trade Organization rules.

Chinese companies already provide critical equipment to Indian company Bharti Airtel. Photo: Himanshu Bhatt/NurPhoto/AFP

Within months of India’s app ban, the US too said it planned to ban Tik-Tok as its trade war with China escalated, though it is yet to enforce the blockage. The Donald Trump administration said Tik-Tok posed a national security risk as personal data collected on as many as 100 million Americans who use the app could be accessed by the Chinese government.

Data safety is a growing concern in India as it sees exponential growth in digital use. Internet users will increase 40% to almost 800 million and the number of smart-phones will double to 700 million by 2023, the McKinsey Global Institute predicts.

The Indian government has enrolled 1.2 billion Indians in a biometric digital identity program, and 10 million business people in a common digital platform through a Goods and Services Tax, it says.

By 2025, core digital sectors such as IT and business process management, digital communication services and electronics manufacturing could double to between $355 billion land $435 billion in India, McKinsey says.

Newly digitizing sectors, including agriculture, education, energy, financial services, healthcare, logistics, and retail, as well as government services and labor markets, could each create as much as $150 billion of incremental economic value by 2025 as digital applications in these sectors help raise output, save costs and time, reduce fraud and improve the matching of demand and supply, McKinsey Global Institute says.