India-UK FTA – Exciting Opportunities for the Indian Chemical Industry

In July 2025, India and the United Kingdom (UK) signed a long-awaited Free Trade Agreement (FTA) after negotiations of more than 2 years. This is by far one of India’s biggest bilateral trade deals with a G-7 nation. The deal cuts down tariffs on over 90% of goods, aiming to boost trade in sectors like pharmaceuticals, specialty chemicals, and textiles, among others.

For India’s massive $300 billion chemical industry, it’s more than just a trade deal – it’s an entry into one of the world’s most quality-sensitive markets. In FY24, India had exported nearly $570 million worth of chemicals to the UK. With the new FTA, exports are expected to surge more than 30-40% within the next 2 years, crossing $1 billion by 2027. The agreement comes at a critical time when countries worldwide are working to secure critical supply chains and reduce overdependence on certain partners. 

Which Sectors Will Have the Strongest Impact?

Under the FTA, India and the UK have agreed to gradually reduce or eliminate altogether the tariffs across more than 11,500 product lines. The UK will remove customs duties on all of its tariff lines over the next 7 years, allowing 99.6% of Indian exports by value to enter the British market without import duties. 

On the other side, India will lower or remove tariffs on over 80% of UK tariff lines within 10 years, covering around 70% of imports from the UK. This phased approach gives both countries time to adjust while making trade more open, predictable, and balanced. 

But the FTA’s impact won’t obviously be uniform across the chemical landscape. Here's where the surge is expected to be most noticeable: 

1. Specialty Chemicals

India’s specialty chemical exports crossed $30 billion in FY24, with segments like high-purity solvents, advanced fluorochemicals, and performance polymers driving the growth. These products are critical to the UK’s emerging sectors, including electric vehicles, aerospace, and clean energy. The removal of tariffs previously ranging from 5-8% gives Indian suppliers a stronger cost advantage.

2. Agrochemicals

The British demand for low-toxicity agrochemical solutions is rising, and India is one of the few countries with a cost-competitive supply base. With previous UK tariffs of 4-6% now removed, the market becomes more lucrative for agrochemicals, especially herbicides, fungicides, and biopesticides.

3. Dyes & Pigments

India controls 16% of global dye production and leads the exports of synthetic dyes. The UK’s textile and coatings sectors depend on these imports. With import duties of up to 6.5% now off the table, Indian exporters finally have the breathing room to compete more freely in the British market.

4. Pharma Intermediates & APIs

In FY24, India exported $4.1 billion worth of APIs and intermediates to Europe, with the UK alone making up nearly 15% of that trade. With the FTA in place, the UK will now recognize India’s Good Manufacturing Practices (GMP) and provide quicker regulatory clearances, boosting shipments.  

Benefits of the "Co‑Equal Rule"

The India-UK FTA introduces a new concept called the co‑equal rule, which is a big win for exporters in sectors like specialty chemicals and pharmaceuticals. But what does this exactly mean? 

Traditionally, to get tariff benefits under a trade agreement, a product had to meet specific Rules of Origin, which means a certain percentage of its materials had to come from the exporting country. This often made it harder for exporters who sourced ingredients or components from different countries. With the co-equal rule, materials from India and the UK will be treated equally when calculating whether a product qualifies as "originating" for duty-free access. 

For example, if an Indian company is making a specialty chemical that uses some inputs from the UK and some from India, with the co-equal rule, both sets of inputs will now count toward meeting the requirement. The final product will still qualify for tariff-free export. This is especially important for pharma intermediates, APIs, dyes, and fine chemicals, where supply chains are global and inputs come from multiple places.  

Strategic Benefits for the Indian Chemical Industry

1. Regulatory Support and Faster Market Access

One of the most powerful aspects of the India-UK FTA is the recognition of Indian regulatory systems. By aligning India's GMP with UK standards, the agreement will shorten product approval timelines and reduce redundant audits. This will not only lower compliance costs for Indian exporters but also make it easier for UK buyers to source from Indian suppliers with confidence.

2. Boost to SME Exporters and Tier-II Cities

For years, small and mid-sized chemical firms in cities like Vapi, Surat, Ankleshwar, and Dahej have done the heavy lifting in India’s exports, but often stayed in the shadows of global trade. High tariffs and complex paperwork made direct entry into developed markets like the UK difficult. The new FTA changes that. 

Now, with simplified rules and lower costs, these firms can access the UK market directly. According to IBEF, India’s SME share in total exports is around 45%, but their representation in developed markets like the UK has been low. The FTA could increase SME participation in bilateral trade by 20–25% in just 2 years, meaning more jobs, more foreign exchange, and more balanced regional growth.

3. Investment Opportunities

The UK has been one of the top 5 foreign investors in India, and the new FTA gives that relationship new support and a massive boost. The FTA includes provisions that improve protection for foreign investors, simplify dispute resolution, and create a more predictable regulatory environment. This could further increase investments in:

• Green chemistry and clean process technologies
• High-performance polymers and composites
• Contract manufacturing organizations (CMOs) and specialty production parks
• Research and development centers focused on new molecules and formulations

Some early signs are already visible as of today. In June 2025, London-based specialty chemicals firm Johnson Matthey signed a memorandum of understanding with the Government of Gujarat to set up a catalyst manufacturing facility with an investment of USD 80 million. 

What are the Long-Term Impacts?

What sets this trade agreement apart is its potential to change how the world sees India's chemical industry. It’s not just about increasing exports or saving on tariffs. It’s about shifting from short-term opportunities to long-term partnerships. With better regulatory alignment and more predictable compliance rules, Indian companies now have a real chance to become trusted suppliers in the global market.

This shift is also happening at a crucial moment. Many countries are rethinking their dependence on single-source suppliers like China. India is stepping up with strong scientific talent, growing infrastructure, and a clear policy push. But this opportunity comes with responsibility. The real impact will depend on how quickly Indian firms adapt, upgrade, and build the kind of trust that lasts.

How is Scimplify Positioned?

At Scimplify, we are enabling the future of chemical manufacturing from India to the world. As a science-led, sustainability-focused company, we partner with companies across the UK and other European countries to develop and deliver high-quality specialty chemicals, advanced intermediates, and custom molecules, all while meeting the most demanding global compliance standards, including REACH, RoHS, and EU-GMP.

Our team blends deep chemistry expertise with digital-first operations, offering real-time visibility, rapid tech transfer, and a seamless experience across development, manufacturing, and supply chains. With our deep commitment to green chemistry principles, our processes align with the sustainability goals.

Are you looking for a partner who can help you navigate the current trade challenges? Contact us at info@scimplify.com to explore how we can collaborate to ensure your chemical business stays ahead in today's uncertain times.