On 21 April 1948, a resolution on Kashmir was adopted by the UNSC. According to that resolution, India should hold a referendum in Kashmir.
Given the current chaotic situation in Kashmir, why doesn't India hold a referendum?
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Because of the fear of losing the territory.
India (as a state) has no chance of getting a favorable outcome from a referendum.
There has been even a suggestion from within the Indian government to de-populate Kashmir to reverse the possible disfavourable outcome.
The UNSC Resolution.
According to the UNSC resolution, Kashmir is a disputed territory. That resolution talks about three points,
- Part I calling for a complete cessation of hostilities.
- Part II asked for a complete withdrawal of Pakistan's fighting forces, including the army, tribes and other Pakistani nationals, and stated that the evacuated territory would be administered by local authorities under the surveillance of the Commission. Following the Pakistani withdrawal, India was expected to withdraw the "bulk of its forces" reducing them to the minimum level required for maintaining law and order.
- Part III stated that, after the acceptance of the truce agreement, the two countries would enter into consultation with the Commission for settling the future of the state in accordance with the will of the people.
Now, there are multiple issues with this resolution,
It asks Pakistan to withdraw its army first. Now, India demands Kasmir as their integral part, not a disputed territory. So, there is no guarantee that India will abide by the UNSC resolution if Pakistan withdraws its army first. So, there is a heavy risk for Pakistan to suffer a strategic defeat.
This resolution doesn't directly say anything about arranging a referendum. Rather it talks about forming a commission and settle the dispute by bilateral discussions. India is not even interested in talking about Kashmir. That means India can keep the matter dangling for years. That means a de facto Indian win.
While democracy is one of the best-liked forms of government, that doesn't mean it is always the best-suited tool to make decisions.
An important property of modern democracies is that while adhering to the choice of the majority, it respects the rights of minorities as well.
If a democracy doesn't do that, it effectively becomes a "tyranny of the majority".
What if a referendum would show that 51% wants to stay with India? That means that 49% will then suddenly stop wanting to be part of Pakistan? It means that Pakistan suddenly will accept the result of that Indian referendum when they feel almost half the people in Kasmir are being mistreated by being forced to live in "the wrong country"?
Vice versa, if 51% votes to be with Pakistan, should India ignore the 49% that wants to stay in India?
In short, chances are that such a referendum would cause more problems than solve.
Then there is the other thing about such referenda: they can be influenced. When Russia held a referendum in Crimea, asking people there wheter they wanted to be part of Ukraine or Russia, there were many allegations that the referendum was rigged. There were reports of armed (Russian or pro-Russian) military overseeing the voting, accusations were made about the referendum being rigged because of ethnic cleansing by Russia in the past (if you remove those who want to vote A, the majority of those who remain will vote B). Whether these allegations were (all) founded in truth seems irrelevant, they did contribute to the general feeling that the referendum was a hoax.
Kashmir is the 5th largest state of India in terms of area and is strategically very important. It shares borders with two Chinese provinces namely Tibet and Xinjiang. Secondly 4 out of 5 Pakistan's major rivers flow through Kashmir and India can easily threaten Pakistan by threatening to stop the river water.
Now we will come to what will happen if a referendum happens. Kashmir has a Muslim majority population with 68% people being Muslim and also India has done many atrocities in Kashmir with death toll in Kashmir rising every year so it is obvious that Kashmiris would vote for separation from India, either joining Pakistan or making separate Kashmiri country and as I have talked about importance of Kashmir to India.
India would never want to lose such an important piece of land and so it doesn't hold a referendum in Kashmir
The Indian Subcontinent doesn't operate with the same values and systems as the west. The unwritten rule is that disputes and conflicts related to separatism are settled through violence and not elections/referendum. India does this in Kashmir, Pakistan does this in Balochistan and Sri Lanka does this in Tamil Eelam.