Is India Betting Big on Huawei?
A divided domestic telecoms industry, disagreement within the central government, and a desire for India to develop its own systems have made the country’s calculations on 5G all the more complicated.
Countries all around the world are busy creating their policies around the next generation of wireless technology, the 5G network. With greater speed and capacity, 5G is expected to spur innovation and underpin future smart city technology. In India, for example, it will not only provide economic benefits—estimated by some to be as much as $1 trillion by 2035—but can also be a crucial tool for social transformation by increasing access to quality education, health care, and transportation services.
Not surprisingly, New Delhi wants to be at the forefront of adopting and deploying 5G networks. In 2017, India’s Ministry of Communications set up a High Level Forum comprising representatives from key ministries, academia, experts, and industry stakeholders to approve a road map for deploying 5G by 2020. By mid-2018, the committee submitted its report with policy recommendations for technology demonstration, 5G trials, and spectrum allocations.
However, the simple task of adopting the most affordable and reliable vendor for the technology has swiftly become a tangle. The Chinese telecommunications giant Huawei has risen to the top as the most affordable and technologically advanced supplier, but it is also at the center of an ongoing battle between the United States and China for technological dominance.
Huawei’s close ties with Beijing have stoked suspicions that its equipment could be used to facilitate espionage, surveillance, and cyberattacks. In turn, the United States and some of its allies, such as Australia, have banned Huawei technology and are urging others to do the same. And so the countries caught in the middle face a dilemma: choose Huawei or any other Chinese technology company and suffer pushback from the United States or ban Huawei and face what are called “reverse economic sanctions” from China, which would entail restrictions on market access for foreign products and businesses.
Indian policymakers thus face a critical choice—one that will require them to carefully weigh and balance a broad range of economic, political, technical, and strategic considerations. As a first step, in December 2019, India’s minister for telecommunications, Ravi Shankar Prasad, announced that all applicants—including Huawei—would be allowed to participant in trials debuting 5G in India.
Huawei must have been relieved. The company had put in proposals to conduct 5G tests over the summer, and it had been allowed to showcase potential uses for its wares at the 2019 India Mobile Congress, a digital technology forum organized by India’s Department of Telecommunications.
Prasad’s December announcement—coupled with events over the last year—shows that India was probably never going to agree to the United States’ demands to block Huawei from all consideration. But that doesn’t mean that everyone in New Delhi is happy that trials are now set to begin by March.
Some people close to Prime Minister Narendra Modi’s administration have explicitly criticized New Delhi’s decision. For example, the Swadeshi Jagran Manch—an affiliate of the Rashtriya Swayamsevak Sangh, an organization that supports the ruling Bharatiya Janata Party—has repeatedly urged the government to ban Chinese telecom companies, saying they posed an “unacceptable security risk.” Meanwhile, V.K. Saraswat, a member of the government’s policy think tank, the National Institution for Transforming India, has said that allowing Huawei to participate in 5G trials will make India “vulnerable” to cyberattacks and could be a major setback to the indigenous development of 5G technology. V. Kamakoti, a member of the National Security Advisory Board, which advises Modi on security matters, echoed similar concerns and emphasized that only a purely indigenous technology could offer a truly secure 5G network for India.
The potential for indigenous technology to provide a secure and strategically neutral solution to the Huawei conundrum cannot be ignored. But its success hinges on three critical factors, namely: investment and funding, technical know-how, and a sound policy framework. India is yet to match the money spent by other countries on 5G technology; a maiden effort to set up indigenous 5G test testing in 2018 was granted a relatively paltry sum of $31.5 million, compared to the hundreds of billions of dollars across a combination of government funding and commercial investments that China has reportedly spent. On policy, although there has been talk of developing 5G under “Make in India”—a Modi initiative to boost domestic manufacturing and entrepreneurship—little has been revealed on how exactly the plan would be leveraged to develop 5G. While a homegrown solution is important and should be encouraged, it may take a long while to come to fruition. If the Modi administration wants to prioritize the early deployment of 5G, then it will likely have to consider conceding to the demands of either the United States or China.
Meanwhile, whatever the value of indigenous technology over the long term, India has to take cybersecurity seriously. In the 2018 Global Cybersecurity Index released by the International Telecommunication Union, India was downgraded by 24 positions to a rank of 47. Incidents of malicious cyberattacks and massive breaches of personal information continue to take place, such as the 2018 Aadhaar data breach and the 2019 cyberattack on the Indian Space Research Organization and the Kudankulam nuclear plant. Further slippage, coupled with the lack of robust legal and institutional mechanisms for responding to cyber-threats could have grave ramifications for personal data protection, privacy, and security, and it may even deter businesses from investing in India if they feel that their customer data and sensitive information won’t be protected.
Another consideration for the Modi government is that India’s mobile operators—particularly the so-called Big Three, Bharti Airtel, Vodafone Idea, and Reliance Jio, which together hold a share of over 50% of India’s total wireless subscriber base—are also split on Huawei. A news report from January revealed that both Airtel and Vodafone have already partnered with Huawei, ZTE, Ericsson, and Nokia to conduct 5G trials. In fact, those two companies are longstanding customers of Huawei and use its equipment for 2G, 3G, and 4G in certain service areas. In October 2019, Bharti Airtel Chairman Sunil Mittal praised Huawei’s superiority and asserted that India should leverage its population and geographical proximity to China to extract the best deal from Beijing.Yet Jio has so far avoided partnering with the Chinese firm, opting instead for Samsung. Meanwhile, government-owned mobile operators such as Bharat Sanchar Nigam Limited have entered into a memorandum of understanding with Nokia for 5G development. While the state operator’s rationale is unclear, allegations that Huawei hacked the company’s network in 2009 and 2014 may give a hint for its reasons.
This puts New Delhi in a tough spot. Should it ban Huawei, doing so will not only reduce competition and constrain operators from extracting the best deal from other 5G vendors, but it will also lead to policy uncertainty, increase prices for subscribers, and jeopardize future Chinese partnerships. By allowing Huawei in, the government retains the benefit of choice and competitive prices for 5G equipment. However, it may not be able to adequately protect mobile operators from losses related to cyberattacks and breaches—should Huawei’s equipment genuinely prove to be Beijing’s instrument to carry out subversive activities.
Either way, the Cellular Operators Association of India, an industry association of telecom operators, wants the government to arrive at a decision quickly so that the association can “future-proof” its decisions. For this group—which includes the Big Three and other tech companies—apart from honoring preexisting partnerships, affordability will probably be the most important factor in building the 5G network. India’s telecom sector is facing a triple whammy of high debts, low investments, and lack of adequate revenue. At the same time, it is also looking at a bill of around 1.5 trillion rupees, about $21 million, after the Supreme Court ruled on a new definition for adjusted gross revenues. In short, telecom operators are in no position to invest in expensive equipment, and that sets up Huawei as an attractive and viable option.
The question of geopolitical considerations also looms large. Partnership with the United States helps India maintain a bulwark against China’s increasing influence in Asia and the Indo-Pacific, courtesy of Beijing’s Belt and Road Initiative. If it doesn’t ban Huawei tech, New Delhi may lose U.S. support in multilateral forums, such as the United Nations Security Council. Other efforts to build the strategic partnership, such as the 2+2 ministerial dialogue and some military cooperation agreements, may also suffer.
At the same time, though, Chinese-Indian relations are riddled with mistrust. Unresolved border issues and Beijing’s close friendship with Pakistan raise tangible concerns about the potential use of Huawei tech to spy on India. But, by banning Huawei, such mistrust would further deepen. It could reverse what little progress was made between the two during the October 2019 Mamallapuram summit. New Delhi’s cooperation with Beijing would also strengthen its position in platforms like the Shanghai Cooperation Organization and BRICS at a time when India may increasingly find itself alienated in continental Asia given the upswing in Russian-Chinese relations. All factors require a careful cost-benefit analysis to determine which pushback will hurt India the most
India, of course, is not alone in facing tough choices on 5G. For example, in Germany, Berlin’s decision to allow Huawei to bid for contracts is facing opposition within Chancellor Angela Merkel’s own ruling party—despite the fact that allowing Chinese manufacturers to participate in 5G trials does not even guarantee that they would eventually be allowed to secure contracts as vendors. And due to Japan’s ban on Chinese equipment in public procurement, the Softbank group—a major mobile operator in the region—announced a surprise decision to select Europe’s Nokia and Ericsson as its vendors, despite having carried out widespread trials with Huawei. In India’s case, it could likewise go through with some tests only to opt out later.
Yet banning Huawei post-5G trials may increase costs for operators that partnered with Chinese companies for the exercise. Vodafone Hutchison Australia was a major customer of Huawei’s technology prior to Australia’s ban. It subsequently signed a five-year deal with Nokia to supply equipment for its 5G rollout, but it lamented that the government’s decision had set it back 12 months.
As of today, 55 telecom service providers across the world have commercially deployed 5G services, and over 150 commercial trials are underway. Given the potential benefits of 5G, India wants to streamline its adoption. Whereas a decision to include Huawei in that process would send a strong signal of rapprochement with China, it could potentially jeopardize India’s evolving strategic partnership with the United States. On the other hand, banning the company may not only worsen Sino-Indian bilateral ties, which are at a stage of cautious amicability, but also increase financial costs and lengthen delays for swift deployment of 5G in the country.
The divergence of opinion among powerful stakeholders in India has further complicated this dilemma. However, by allowing Huawei to participate in the upcoming 5G trials, New Delhi may have made a smart decision. By not preemptively excluding any supplier, it has given itself more time to take a final call. It has also given itself a unique opportunity to closely assess alleged risks and vulnerabilities in Huawei’s gear—information that will be useful as it tries to balance all its domestic and strategic interests.
Harsh V. Pant is the director of research at the Observer Research Foundation in New Delhi and a professor of international relations at King’s College London.
Aarshi Tirkey is a Junior Fellow with the Observer Research Foundation's Strategic Studies Programme.