Indian companies are beginning to make forays into Jammu and Kashmir, driving a revival of construction, tourism and entertainment two years after Narendra Modi’s government cracked down on the volatile northern territory.

New Delhi has been quietly pressing companies to invest in Kashmir since revoking the state’s special autonomous status in 2019, part of a campaign to bring the region to heel following a decades-long separatist conflict. As the unrest has abated — with dissidents silenced or imprisoned — some businesses are now heeding the government’s call.

Sajjan Jindal, the billionaire industrialist and chair of conglomerate JSW Group, is investing $20mn-$25mn in a new steel facility in Pulwama, outside Srinagar, the capital, which is due to open in March. The move made “business sense”, he said — but he also cited patriotic duty.

“We wanted to also support the government’s initiative of industrialising the J&K area,” Jindal told the Financial Times, using an abbreviation for the territory. “As a patriotic Indian, I feel that it’s my responsibility.”

Journalists’ ability to report in the region remains severely restricted, but on a recent trip, business figures and government officials echoed the view of Modi’s Bharatiya Janata party that investment would create jobs and alleviate separatist tensions that date back to India’s 1947 partition from Pakistan.

“We have to do things to normalise the situation in Kashmir,” Jindal said, so that “business becomes more important over territorial disputes”.

Jammu and Kashmir, India’s only Muslim-majority region, has long been riven by one of Asia’s most bitter conflicts. Both India and Pakistan lay claim to the territory in full, and Pakistan occupies part of it.

It had its own constitution and flag until 2019, when Modi’s government abolished Article 370 of the Indian constitution that guaranteed local autonomy as part of a campaign to root out militancy.

The region has long had a successful agriculture sector and a niche in high-end handicrafts but has struggled to build a viable industrial base in the Kashmir valley, in part because of the conflict. The unemployment rate was 23 per cent in March, the third-highest in the country, according to the Centre for Monitoring Indian Economy.

This year, the announcement of lithium reserves in Jammu raised hopes of capitalising on a surge in demand for the mineral used in electric vehicle and laptop batteries, though some geologists have voiced doubts about the size and accessibility of the deposit.

Tour groups, mostly Indian, have resumed taking boat rides on Srinagar’s picturesque Dal lake or riding ski lifts in Gulmarg, and JSW’s charitable foundation is working with the regional government to restore Mughal-era gardens, a heritage site and tourist draw.

Bollywood producers have resumed shooting in some of India’s most scenic locations, drawn by subsidies from the central government that cover up to 25 per cent of production costs.

But sporadic violence still plagues the territory. Two Indian soldiers and a police officer were killed last month during an operation in the Anantnag district of southern Kashmir, triggering a manhunt as well as a torrent of angry invective on social media against Pakistan.

“Kashmir hasn’t recovered from the double impact of the 2019 clampdown, which brought everything to a standstill, and Covid,” said Praveen Donthi, senior analyst for India at the International Crisis Group. “Except for the inauguration of a couple of projects, such as JSW’s steel plant, it remains only a promise of investment so far.”

The scrapping of Article 370, which came months after a suicide attack on a paramilitary police convoy that killed 44, was accompanied by mass arrests of politicians and activists, a crackdown on local media and civil society groups and an internet shutdown that lasted more than a year.

“Broadly speaking, the violence has been contained by a very strong security force,” said Ajai Sahni, director of the Institute for Conflict Management in New Delhi. Fatalities from the conflict had declined from a peak of more than 4,000 in 2001 to 253 in 2022, Sahni said.

Armed police are still omnipresent along the streets of Srinagar’s city centre as well as on major roads in the territory. Some Kashmiris, who preferred to remain anonymous, welcomed the relative calm, but others deplored the heavy-handed repression. “We are New Delhi’s colony now,” one man said.  

But another consequence is the return of nightlife, once unthinkable during the decades of strife, when militants would declare hartals — enforced shutdowns or strikes — that businesspeople said blurred the lines between political action and economic coercion. Gaming arcades now operate in Srinagar and at least two Indian companies have opened cinemas since last year.

“We are investing in J&K to bring cinema back,” said Kanika Singal, co-founder of Jadooz, an education and entertainment start-up that has opened four screens in the territory, with three more under construction.

At Inox, Kashmir’s first multiplex, a midday showing of Jawan, the blockbuster starring Bollywood star Shah Rukh Khan, was nearly full.

Vikas Dhar, who operates the cinema theatre for PVR Inox, the Indian leisure group, said that when he approached representatives about a project, they told him: “We have to have a really good reason to get into Kashmir.

But Dhar, whose Kashmiri family owned a cinema next door that was torched in 1993, said they had agreed within minutes after he said it was “for the national interest”. Inox confirmed Dhar’s account and declined to comment further.

Civil servants — who are now overseen by New Delhi — said they had received a surge in investment proposals, ranging from healthcare to cold storage facilities. 

“Industry has started reviving, and we see a lot of interest,” said Vikramjit Singh, commissioner with Jammu and Kashmir’s Department of Industries, adding that investors had put down deposits for land in industrial estates in projects with envisaged investment worth about Rs14.9bn ($181mn) since the territory introduced a new industrial policy in 2021.

At the JSW site in Pulwama, steel girders marked the plant where workers will coat steel for roofing materials, in brisk demand as construction accelerates.

In the past, Jindal said, “nobody would go” to Kashmir for business. “Now the environment is much better.

“There is peace,” he said. “The Kashmiris are welcoming investments.”