India just has its finger on Pakistan's lifeblood.
To put it simply, while the Jammu-Kashmir conflict can be seen as yet another third-world territorial pissing match, it's actually a bit more complex. See, the Indus River is basically the main lifeblood of Pakistani civilian and commercial infrastructure, as without it, the whole nation dies of thirst and otherwise good farmlands dries up to a wasteland. Pakistan wants Jammu-Kashmir to protect the headwaters of the Indus River, India wants that selfsame territory in order to have leverage over the Pakistanis. While India can't exactly dry up the river entirely, it can put a few dams in the name of "regional development", and said dams will then reduce the flow of water to about two hundred million Pakistanis.
There's also the factor of there being a considerable Muslim ethnic group in the mountainous region, and they were the primary excuse Pakistan used to claim that territory in 1947.
IOW, India gaining control over Jammu-Kashmir is going to rile up the Pakistanis something fierce, for reasons both nationalistic and existential.