A part of the erstwhile Princely State of Kashmir and Jammu, the region is the subject of a territorial conflict among China, India and Pakistan. The western districts of the former princely state known as Azad Kashmir and the northern territories known as Gilgit-Baltistan have been under Pakistani control since 1947. The Aksai Chin region in the east, bordering Tibet, has been under Chinese control since 1962.
Jammu and Kashmir consist of three regions: Jammu, the Kashmir Valley and Ladakh. Srinagar is the summer capital, and Jammu is the winter capital. Jammu and Kashmir is the only state in India with a Muslim-majority population.[14] The Kashmir valley is famous for its beautiful mountainous landscape, and Jammu's numerous shrines attract tens of thousands of Hindu pilgrims every year while Ladakh, is renowned for its remote mountain beauty and Buddhist culture. Jammu and Kashmir's economy is predominantly dependent on agriculture and allied activities. The Kashmir Valley is known for its sericulture and cold-water fisheries. Wood from Kashmir is used to make high-quality cricket bats, popularly known as Kashmir Willow. Kashmiri saffron is very famous and brings the state a handsome amount of foreign exchange. Agricultural exports from Jammu and Kashmir include apples, barley, cherries, corn, millet, oranges, rice, peaches, pears, saffron, sorghum, vegetables, and wheat, while manufactured exports include handicrafts, rugs, and shawls.
Horticulture plays a vital role in the economic development of the state. With an annual turnover of over ?3 billion (US$45 million), apart from foreign exchange of over ?800 million (US$12 million), this sector is the next biggest source of income in the state's economy. The region of Kashmir is known for its horticulture industry and is the wealthiest region in the state. Horticultural produce from the state includes apples, apricots, cherries, pears, plums, almonds and walnuts.
The Doda district has deposits of high-grade sapphire. Though small, the manufacturing and services sector is growing rapidly, especially in the Jammu division. In recent years, several consumer goods companies have opened manufacturing units in the region. The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has identified several industrial sectors which can attract investment in the state, and accordingly, it is working with the union and the state government to set up industrial parks and special economic zones. In the fiscal year 2005–06, exports from the state amounted to ?11.5 billion (US$170 million). However, industrial development in the state faces several major constraints including extreme mountainous landscape and power shortage.The Jammu & Kashmir Bank, which is listed as a S&P CNX 500 conglomerate, is based in the state. It reported a net profit of ?598 million (US$8.9 million) in 2008.
The Government of India has been keen to economically integrate Jammu and Kashmir with the rest of India. The state is one of the largest recipients of grants from New Delhi, totalling US$812 million per year.It has a mere 4% incidence of poverty, one of the lowest in the country.
In an attempt to improve the infrastructure in the state, Indian Railways is constructing the ambitious Jammu–Baramulla line project at a cost of more than US$2.5
billion.[159] Trains run on the 130 km Baramula-Banihal section. The 17.5 km Qazigund-Banihal section through the 11 km long Pir Panjal Railway Tunnel was
commissioned. Udhampur-Katra section of the track was commissioned early in July 2014. The Katra-Banihal section is under construction. The route crosses major
earthquake zones and is subjected to extreme temperatures of cold and heat, as well as inhospitable terrain, making it an extremely challenging engineering project.
It is expected to increase tourism and travel to Kashmir. Three other railway lines, the Bilaspur–Mandi–Leh railway, Srinagar-Kargil-Leh railway and the Jammu-Poonch
railway have been proposed.