The security risk from unbranded Chinese mobiles can be guaged from the fact that a number of bombs have been triggered by terrorists by these phones. Mobile phones are part of terrorists' essential equipment, for getting instructions from their handlers or for passing on information. If they use legal phones, their location can be found by IMEI numbers.
To give an example, after the Mehrauli blast (in Delhi last year) the terrorists melted away without a trace. However, assuming that they had mobile phones, it should have been possible to track them down by zeroing in on all the phones that started to move away from the blast site immediately after the bomb went off. Instead of blindly putting roadblocks across the city, the security forces could have pinpointed all suspicious post-blast movements and caught the terrorists.
Security forces believe that, as it appears in the Mehrauli case, terrorists have taken to these unbranded Chinese phones to mask their movements. Currently, about 7-8 lakh Chinese phones come into the country every month. This figure was much higher before the talk of their ban started - in September 2008, 1.5 million of these phones came into India.