What would be considered as Kashmir? Would Gilgit-Balistan also fall into Kashmir? What about Jammu and Leh? Northern Areas?
What about the Indus water treaty? How do you think the water would be divided among the three countries. I am pretty sure Kashmir would reserve a lot for themselves as they are already complaining about less water at the moment?
Would Kashmir be declared a no military zone? One of India's main concern would be Kashmir cozying up to Pakistan Army as they have provided financial support to the separatist movement for so long. Kashmir has acted as a buffer for India for very long. If Pakistan would have any presence in Kashmir, it would not go well with India.
Secular or theocratic? What about Kashmiri Pandits and Sikhs? They were driven out by same separatist that would most likely rule Kashmir. How can they ensure safety of Hindus and Sikhs?
If Kashmir were to become a sovereign nation
1)Another partition and mass migration and with it lot of repercussion
2)Another Islamic state bordering India
3)Communal Violence in India
4)India and Pakistan would continue to fight to exert influence over Kashmir. I would say the enmity would be more intense than it is now
5)India would have another Afghanistan next to its border, with the same repercussions that Pakistan is experiencing now at its western border.
6)Kashmir would become new battleground for world leading powers so as to exert their influence in the region and contain India and China
7)Kashmir would become another playground for Taliban or its clones
8)There will be huge unrest in states of India bordering Kashmir
9)Pakistan would loose its share of water as the Indus Treaty would become redundant and major parts of Pakistan would become barren. This may lead to lot of refugee influx into India and Iran, leading to total disaster for the whole region
The list can go on…