This is all from the perspective of “rational” actors in government leadership. The power/threat of Islamic nationalists (terrorists networks) in Pakistan lends to these actions by India, and more Hindu nationalist government, heightening the instability between the two nations. I fully see an outcome where some terrorist cell in Pakistan gets their hands on a nuke or other ballistics and launches an offensive...will it happen tomorrow, probably not, but if India keeps going the way it is, these hardline attitudes between the two nations will escalate conflict.
The thing is, for the most part both nations DO have rational actors in charge. The actual people running the show aren't fanatics, they're just taking advantage of fanatics in order to wield power. Neither nation desires to do anything self-destructive, the problem is that neither actually cares about the welfare of a large proportion of their population either.
Of course if a terrorist on either side somehow gets a nuke (extremely unlikely in Pakistan, I'd say more likely to come from North Korea or even Russia), then all bets are off. But that would be true regardless of who was in power.
And I should be clear - there ARE fanatics in important positions in government, they just aren't the ones calling the shots at the top. If either side is suicidal enough to put the actual fanatics in charge then it's hard to say what will happen. But I still think that even the actual fanatics are more concerned with "purifying" their own nations than starting wars with others.
How does Khasmir fit into this equation?
I don't know anyone on the inside inside enough to understand exactly what the government is trying to do with these Kashmir moves.
The most superficial answer is that so long as Kashmir had a form of protection and couldn't be touched by the rest of India in some ways, it was a limit on Hindu power in the country. So you remove those protections, put them under further control of the federal government, allow outsiders to buy up their land and begin to displace their population, and you work to have just as much control over Kashmir as you have over the rest of the country.
A different and equally likely answer is that it was pure red meat for their voter base. Their most radical supporters wanted to annex Kashmir into the rest of India and "take their land and their women" as many openly said, and so the government delivered. Escalating sectarian tensions has always been a great election move for them and so they have no fears of the political repercussions. Before their biggest fear was juggling their sectarian supporters and their business world supporters (sort of like the Republicans juggle a social issues base and an economic issues base). They didn't want to appear too focused on the pro-Hindu stuff out of fear of losing the voters who were just there for the business/economic stuff. But they've been so successful on the sectarian issues, while the economy isn't delivering, that they appear to have just said, "fukk any appearance of going too far" and are betting all-out on the sectarian issues.
Both answers are probably correct.