Srinagar, July 9 -- On a July afternoon in Lal Chowk, two electronics shopkeepers sell the same machine, purchased from the same supplier at a wholesale price of one lakh rupees.

By closing time, their cash drawers tell very different stories.

That simple difference, repeated thousands of times each day in markets across Kashmir, points to a deeper problem that local economists have begun to identify.

Irfan Ahmad runs a shop three doors down from Ali Bhat's. Both men learned the business from their fathers, who learned it from theirs.

Irfan holds to an old formula: buy low, mark up high, and sell to whoever walks through the door willing to pay. He prices his machine at one lakh fifty thousand rupees, banking fifty thousand rupees in ...