Both India and Pakistan also follow wrong policies because of the US' stand. Indian response is that of a firefighter in the Valley and it is mostly apologetic about granting amenities to Jammu and Ladakh. There will be never a permanent equilibrium between Hindus and Muslims in India as well because of the continuing dispute. Pakistan continues to fuel dissent and tries to increase the cost of maintaining Indian state because it believes it can get the whole of J&K using such tactics. This distorts all equations among the demography and could confuse people about majorityism and minorityism. What is required is the dilution of aggression and promotion of symbiosis.
If the US continues to consider whole of J&K disputed, the only way the dispute could be resolved is through referendum. But referendum is no practical option as due to identity-driven consciousness the results are known. Referendum is also not a viable option in view of so much complexity of geography and demography deposited over last 65 years. Consistency and fairness should take secondary status as compared to realpolitik and stability of region. The fact is that Pakistan is too hot to add any new territory to its Union.
Moreover, referendum, generally speaking, can not be and should not be imposed on a powerful and nuclear-potent state like India. Also, if the results of referendum undo asymmetries then they could spill-over instability all over the region. If the US keeps all options open then volatility and uncertainty would increase and stability would decrease. The status of valley as disputed does not mean that referendum should be the option there. The denial of referendum becomes more important in view of the fact that Pakistan can not enforce a solution of Kashmir dispute on India. The best thing would be to dictate and induce a solution favorable to all parties.
But the fact is that Kashmir is core dispute between India and Pakistan as per Pakistani perspective and a big part of international community believes so. Of late, terror has also become a core dispute between India and Pakistan. The solution needs to be found out. The Valley can become a majorly Indian staked buffer region between India and Pakistan with Pakistan possessing partial stakes in Srinagar and some other parts of Indian Kashmir Valley and allowing swapping stakes to India in Pakistani Kashmir. Once the agreement is signed Pakistan would disclaim all other claims permanently and forever. Jammu and Ladakh would be considered fully merged with Indian Union and Pakistan should also consider Azad Kashmir and the Northern Areas as fully merged. The status of Valley would be special but it does not mean joint or shared sovereignty. With the loss of partial sovereignty in the J&K both sides can invest in peace instruments, treaties and derivatives.
In order to make it a practical idea the US should be allowed to buy a significant stake in Indian Kashmir Valley and it would partly transfer it to Pakistan by option of buying them or through any other internationally accepted transactions and derivatives. But such indirect possession of stakes by Pakistan would be conditional, like, not revoking treaty, not fuelling fundamentalism in India and desisting from doing daring acts on Indian soil. Other than being conditional to Pakistan, the transfer of stakes to the US would also be conditional and it should be economically beneficial to India even in linear economic sense. The non-linearity of economics would make it profitable to all parties. The treaty should be quantified and for that purpose various indices of fundamentalism could be derived. The US can also buy some stakes in Pakistani Kashmir and India indirectly can possess some of them. The treaty can not be violated more than twice. It is like screening effect observable in quantum mechanics. It means that the US would screen out animosity between India and Pakistan and use its good offices to deliver the solution. All laws should be made accordingly by respective Parliaments.
There is another quantum phenomenon which can be used to induce requisite changes in J&K and this is called vacuum polarization. In this phenomenon a charge polarizes the vacuum with opposite charges getting more attracted with that charge. Vacuum here means being unbiased and no prejudices and not much historical animosity getting reflected in at least elites of the two countries. The right policies would induce proper polarization and the solution can be worked out.
America’s policy of considering the whole region as disputed is just to prove that it is neutral and objective and takes the cognizance of dispute. But it is faulty in the sense that it is not realistic and does not take cumulated forward history of the dispute into account. Once the dispute gets resolved the status of Jammu and Ladakh could also be resolved by granting them linked and conditional separation from the Valley. But it would not create independent Jammu and Ladakh states. Instead, they would get more autonomy, particularly on economic matters. Only the US can induce dispute resolution but for that it needs to reconsider bipartisan policy of considering the whole J&K state as disputed and benefiting from zero sum game. Instead it should start playing additive sum game; by appreciating majorities which do not suppress minorities. This is the demand of time.