Answer by Aparajita Raychaudhury:
Leaving all the rhetoric of national integrity aside (some of which I happen to believe),
- Economics. Kashmir is an amazing source of tourism revenue. Why would we want that to leave Indian control?
- Geography. Kashmir is our only link to Afganisthan. It's a pretty special state geographically speaking. It also gives us a sort of natural 'Wall of India', through its mountainous borders with our hostile neighbours. Giving up Kashmir would be a bad strategic decision on the geopolitical font, and a pathetic decision on the military font.
- International politics. Strategically it would be suicidal to concede territory to your arch rivals, especially a nation you have already gone to war with over this issue. International politics is a fairly complicated game, but at this point in history, it would be strategic suicide for India to claim/acknowledge that Kashmir is not an integral part of India. We would lose credibility and 'face' on the international scene.
- Investment. A lot of resources has been invested by India in Kashmir – from the BRO building roads in nearly unsurpassable locations to one of the highest rail roads in the world. Losing control of those and giving them up to Pakistan is not a palatable option.
- People. In spite of what you seem to believe, Jammu&Kashmir is not a homogeneous whole. It has three very different group of people in Jammu, Kashmir and Ladakh district. Especially Jammu – to the best of my knowledge – has never asked for a referendum. 'Fight for freedom' has been mostly in the Kashmir district. Though you may mean only the Kashmir district in your question, in which case this point doesn't apply.
- Memory of partition. If you have ever visited Kashmir, you know not 100% people want to seceede from India. When I was there in 2010, our Kashmiri driver almost eulogised the Indian army and the work it has done in Kashmir. A lot of other Kashmiris did the same. Now it may not be a representative survey, because Shaban bhai (our driver) had lost his mother to insurgents/Pakistani terrorists breaking in to his home, and most Kashmiris we met were his friends, but the truth remains not even 100% Kashmiri Muslims want to leave India (for a free state or for Pakistan). And we remember too well what happened the last time we agreed to 'let's split this and allow people to move where they want to'. So no, at any cost, we want to remain united.
- Fear of a domino effect. Even though you say Kashmir is in a unique situation, it isn't. There are other border states which are (or can be, through the destabilising actions of our enemies) in a similar situation. Destabilising such states further is just not an option we can contemplate.
- Propaganda. The idea of an united India has been sold hard and long. Even if 90% of Kashmiris sign a petition requesting a referendum, the rest of India will not believe it was of their own free will (which I will agree with, after having interacted with Kashmiris, but like I already said, I probably met only one kind of Kashmiris).
- Instability. First of all, Pakistan is really a lot more unstable than India is. Even on the international scene, it seems to be pretty well recognised that India is the better off. Not much fundamentalism, no drone strikes against us, no Al Qaida. Whatever. Conceding Kashmir to Pakistan (or giving it independence, which may effectively make it a dummy state for Pakistan), will mean bringing the instability to our door steps. Why would we want such an unstable neighbour to peaceful Himachal and open yet another state for Pakistani insurgency to creep through? We would much rather that Kashmir take the butt of the insurgency and keep the rest of India reasonably safer.
- There is no convincing reason to. No seriously. There has not been many calls for even a referendum from Kashmiris. Not at even one-tenth of the scale there was in Scotland. And it doesn't help that the only people vocally asking for the right to secede (or at least the only people asking who get media coverage) are known to have acted as enemies of India. If after a year of peace, 70% of Kashmiris started a demand for referendum, the rest of India may listen. Till then, all calls of secession is merely Paskitani propaganda (and it helps truly freedom seeking Kashmiris even less that in many cases over the years it has actually been so).
Edit: I missed answering why Indians don't care about the lives being lost everyday due to the conflict. Well because it will continue being lost even if we let Kashmir become a part of Pakistan. Just look at the number of lives being lost in Baluchistan. Or even in urban Paksitan. We have no reason to believe Kashmir's fate will be any better. Nor do we have any reason to believe a Pakistani Kashmir will not be a launchpad for insurgencies in to Punjab, Himachal, Haryana, Uttarakhand and other near by states. With or without the Indian army protecting Kashmir, bloodshed will continue in the Indian state bordering Pakistan. It's not that we don't want the violence to end. We are neither naive enough nor ignorant enough to believe that allowing Kashmir district to become a part of Pakistan will solve anything. We remember Bangladesh too.