Kashmir may have started as the immediate issue soon after partition, but the problem is far deep rooted than that despite what Pakistanis would like one to believe!
First of all, handing over Kashmir puts India in such a strategic vulnerability, militarily, that you would have to be really foolish as a Pakistani to NOT take further advantage of it to cut into Jammu/Ladakh and slice India into manageable chunks (Khalistan). And to think that the Pakistani mindset, that has been brought up with deep-rooted hatred of India and a sense of 1000-year-Muslim-rule-over-India crap, would suddenly turn the corner and let India/Hindus live peacefully, is really pushing it too far (even for Aman-Ki-Asha aunties)!
Besides, secession of Kashmir will only be seen as perpetuation of Two-Nation Theory. Handing Kashmir on a platter would only make Islamists in India salivate at the prospect and embolden them to make similar demands, of course with sufficient "moral support/instigation" from the Pakistan (Assam/WB, anyone?). Not to mention the bloodshed and mayhem that it will cause, that will dwarf, ABSOLUTELY DWARF, anything that was seen in 1947!
OTOH, you deny secession of Kashmir on religious lines, you automatically deny any further opportunity to partition India!
Far more than the resources or strategic advantage that Kashmir brings, it's role as the LINCHPIN that holds the Union together, that is indispensable for India. And it is for this reason that India will throw the proverbial kitchen sink at any attempt to wrest Kashmir and never let go of it!