Because if the government gives Kashmir up, they give the whole damn union up. One of the things foreigners don't often realise about India is that it's a union of dozens of essentially separate cultures, ethnicities and language groups, which can and prior to independence in 1947 did function as separate nations with separate governments and rulers. India is a country, but it is also a union and not all that different from the EU in terms of how diverse it is.
In previous decades there have been powerful separatist movements in the country's west, east, and south, respectively. The Khalistan movement in western India was crushed by brutal military force - in the aftermath of which Prime Minister Indira Gandhi was assassinated by her own security detail, who were Punjabis and killed her in retaliation. The ongoing Naxalite Maoist insurgency in eastern India is also de facto fighting a guerrilla war against the government. From what I know the Naxalites are losing and have been for some time, but they're still around.
Finally in the south there was and is extreme resentment of the cultural chauvinism of the north. We fukking detest the federal government's imposition of the Hindi language, spoken by most Indians, to a land where it does not belong in the south. We hate how our rich culture and history is constantly marginalized and ignored by the north, and resent it all the more because our cultures and lifestyles in the south are far far closer to how things were done in ancient India - we preserve and maintain what the north claims is its alone, although they make no effort to keep it alive. And in the south our politics is far far more left wing to politics in the north. The BJP has never won a single seat in the two southernmost Indian states. The INC barely manages to win one seat per election in the same states. Instead those two states are dominated by four parties: the Communist Party of India, Communist Party of India (Marxist), DMK and ADMK, which are two left-wing socialist Tamil nationalist parties. We don't have any of the social problems of the north - the poverty, the sex ratio and abortion of female fetuses, the rape, the illiteracy, the public defecation, the sectarian violence between Hindus and Muslims, and the violence and discrimination between Hindu castes. Our people are by far the best educated in the country, our economies are two of the strongest in the country, and our population isn't even 10% of the total national population. And on top of everything, we are the darkest skinned Indian people and we face racial discrimination/colourism in the northern states because of our skin.
To bring it back to Kashmir, if Kashmir is granted independence and secedes from the union, the whole thing is in deep trouble because everybody will demand to leave the union. Kashmiris are not the only Indians with powerful and deep-seated reasons to strive for independence. At the end of the day despite all our tensions between each other, we are stronger together as a military force and an economic force. The British conquered us because we were a region of dozens of small country. If a foreign power is to never again enslave India, we have to stick together and pool our resources into one giant nation-state.
