We have discussed this topic to death or talked about it a gazillion times. But here goes logic comments with some basic common sense thrown in aside from the strategic or political agenda discussed above without taking any sides.
1)If India were to give Kashmir to Pakistan then what's to stop some other state in India demanding itself be handed over to Pakistan or even declare itself independent.
2) if India hands over Kashmir. Should India discuss then handing certain disputed territories that China and Nepal claims to be theirs also soon to follow.
3) If India gives Kashmir then is there guarantee that Pakistan won't demand another Indian state be handed also. There is no guarantee except belief and good faith that everything should be hunky dory.
4) if there is also one percentage in Kashmir that wants to be be Indian and stay in India should Indians ignore that ? I know same can be argued the other way.
5) Propaganda. The idea of an united India has been sold hard and long. Even if 90% of Kashmiris sign a petition requesting a referendum, the rest of India will not believe it was of their own free will (which I will agree with, after having interacted with Kashmiris, but like I already said, I probably met only one kind of Kashmiris).
Economy wise India wishes it could somehow dump Kashmir and focus on its economic growth since the number one problem India has today is its poverty levels and huge population in achieving its road to a good economy. It would be easier for India to say had it been a population of 200 million they would be much better.
I hate to say it but the hard bitter pill to swallow is that Pakistan is really a lot more unstable than India is. Even on the international scene, it seems to be pretty well recognised that India is better off. Not much fundamentalism, no drone strikes against India no Al Qaida. Whatever. Conceding Kashmir to Pakistan (or giving it independence, which may effectively make it a dummy state for Pakistan), will mean bringing the instability to India's door steps. India just wants to be left alone while they are meeting and making deals with Us president, Israelis prime minister, Information technology boom, its film industry and do what is right for its country. India really has a lot to loose by handing over Kashmir than gaining anything and a lot of it is just the fear of the negative after math or the fear of the unknown .
Again assuming if India hands over Kashmir would India want such an unstable neighbour to peaceful Himachal and open yet another state for Pakistani insurgency to creep through? India would much rather that Kashmir take the butt of the insurgency and keep the rest of India reasonably safer.
6)I missed answering why Indians don't care about the lives being lost everyday due to the conflict. Well because it will continue being lost even if Indians let Kashmir become a part of Pakistan. Just look at the number of lives being lost in Baluchistan. Or even in urban Paksitan. There is no reason to believe Kashmir's fate will be any better. Nor any reason to believe a Pakistani Kashmir will not be a launchpad for insurgencies in to Punjab, Himachal, Haryana, Uttarakhand and other near by states. With or without the Indian army protecting Kashmir, bloodshed will continue in the Indian state bordering Pakistan. It's not that India doesnt want the violence to end. India are neither naive enough nor ignorant enough to believe that allowing Kashmir district to become a part of Pakistan will solve anything. Allways remember Bangladesh history.
My opinion and not many would agree is that until Pakistan has another successful election where Pakistanis new prime minister can join hands with India without any military coup, let the dust settle then start new talks about what does Kashmir people want and go from there as naive as that sounds.