Kashmir Conundrum

What is it about this place?

I understand that in most cases a sovereign nation is loathe to give up even one inch of territory, for in the final analysis a nation is nothing more than its land and its people.  And in most cases there are commpelling reasons for a nation to cling to it's territory, and even, when circumstances allow, to increase it.  Whether it's industry, tourism or nationalism, governments will fight seperatism and go to war over borders, even the most arbitrarily drawn.

Which brings us to Kashmir.  When the British drew the line separating India from Pakistan, they did so primarily on the basis of religious and sectarian identification.  In Kashmir, they got it wrong.  The people of Kashmir don't want to be part of India.  The Pakistanis don't feel they SHOULD be part of India.  Only the Indians, guided by the logic of nationalism and supported by a historical line drawn by a foreigner for political reasons, want the land and people of Kashmir to remain part of India.

What, exactly, does India get out of the deal?  A restive population, a history of endless wars and low-level fighting, a tremendous cost to keep the border garrisoned and the population controlled, and now the threat of a sudden escalation that leads to a nuclear exchange.  There is no industry to speak of in Kashmir.  Remote and rugged, in a high valley between the Himalayas and the Pir Panjal, Kashmir's best and only hope of contributing to GDP would be tourism - if only it wasn't a heavily militarized war zone.  So it drains manpower and money, contributes to South Asian distrust and instability, and for all India's willingness to fight and bleed, contributes nothing but cost and risk.

Surely a deal might be struck between India and Pakistan whereby Kashmir reverts to Pakistan sovereignity and India is recompensed fairly for the transfer of land.  Certainly the world would not be changed in any significant way, except for a reduction in tension and nuclear threat.  India would still have all her power, prestige and even a little extra wealth.  Pakistan would have a piece of land at the top of the world populated by people who WANT to be Pakistanis.  The world would have one less looming conflict.

I'm sure there are strong Indian counter arguments.  I'm not an expert, so I'm certain I've oversimplified a great deal of the discussion here.  But at it's most fundamental level it's difficult to argue with the basic premise:  If, as a nation, you can reduce tensions, eliminate an ongoing headache and increase your national wealth, it seems that losing what amounts to nothing more than a tiny sliver of land supporting an unhappy population would be something to be considered favorably.