Srinagar, Sept. 15 -- On the outskirts of Srinagar, an abandoned factory stands as a silent reminder of failed ambition. Its rusting gates and empty halls tell the same story found across Jammu and Kashmir's struggling industrial landscape.

According to the Reserve Bank of India's latest data, the region has just 1,015 operational factories. That puts Jammu and Kashmir in 23rd place among Indian states, far behind industrial hubs like Tamil Nadu and Gujarat, which have tens of thousands of factories.

The reason for this gap isn't a mystery.

Over the last two decades, the central government rolled out several subsidy schemes and industrial packages to jumpstart the region's industry. The idea was simple: turn Kashmir's natural wealth in...