Demographic change in a restive region is a time tested strategy. Even your iron brother China does it. So does Israel and Russia and many other nations.
When the percentage of trouble makers in a population is decreased it is easy to control them. And remember in a democracy the number of votes count in forming a govt and the subsequent govt policies. With demography changed the govt that will be elected will no longer be pro seperatists.
As for the practicality, there are lot of areas with overpopulation. Giving people from these areas cheap land in Kashmir can be easily done.