Anything that is too good to be true and available at dirt-cheap prices like the Xiaomi phones sold in flash sales on http://www.flipkart.com, always has a catch. It is like the Trojan horse. The security issue with Xiaomi phones is that the phone allegedly transmits user sensitive data like IMEI, contacts, numbers etc to servers in China. Therefore, it is a bad choice for any discerning consumer who believes the right to privacy must be preserved.
Those who use other manufacturer handsets can easily detect the processes on their phones, the network connections established, the IP addresses, GeoIP location all using one simple and very powerful Android app named OS Monitor available in the Google Play Store at this link https://play.google.com/store/apps/details?id=com.eolwral.osmonitor&hl=en
It is a one-stop solution that saves time and helps identify the process, the IP addresses it connects to and their geo-location. I used to do this manually using a terminal emulator and then type each IP address in a web browser to lookup where the IP addresss was from.
If you find that your phone has unknown network connections to any sites that you do not want to see, then you need to identify the process that makes those connections and then uninstall them or if they cannot be uninstalled normally, disable, block or remove them using the adb shell utility that comes within the android-platform directly. Make sure that you note down the apps that run those processes and also make sure you take a backup of your data before doing so.
Most manufacturers like Sony will take care of such issues if you pester them enough, but Xiaomi will just move it’s servers from China to Singapore or elsewhere, and you still will never get an assurance that those servers do not move your data to China. It is indeed time for the Indian Government to set up a national body that will look into electronic devices with a firmware and weed out those that contain spy ware in them.