Govt report urges economic revival of Kashmir

NEW DELHI (Reuters) - India should beef up infrastructure and industry opportunities in restive Indian Kashmir to get the strife-torn region's economy on its feet and create jobs, a government panel said on Friday.

The picturesque northern state, once one of Asia's most popular tourist destinations, is embroiled in a 17-year-old insurgency against Indian rule in which Indian officials say more than 40,000 people have died.

New Delhi accuses Islamabad of not doing enough to curb Islamic militants from crossing into Indian Kashmir from the Pakistani sector.

As part of their composite peace process, India and Pakistan are trying to resolve their dispute over the scenic region which has been the trigger of two of their three wars.

They have made little headway, although they have said they have open minds about each others' proposals.

The insurgency has left the Himalayan state's economy in tatters and the panel's report submitted to Prime Minister Manmohan Singh said a special industrial zone, better roads, telecommunications and power would help attract investment.

"The long years of strife and militancy have not only damaged physical assets but also have taken a heavy toll on the psyche of the population," the report said.

"To enable the state to dispel this despondency and optimistically participate in the journey to growth and prosperity a few quick yielding projects are vital," it said.

The report called for developing a satellite city close to the state's summer capital Srinagar at a cost of 2 billion rupees to help decongest the crowded city.