In early 2000, shortly before he embarked on a tour of India and Pakistan, then-US President Bill Clinton described Kashmir as the "world's most dangerous place."

A dozen years later, the nuclear neighbours are still contesting the little slice of the Himalayas – but not as fiercely as before.

In 2011, violence in the disputed state dropped to its lowest level since 1989. The Indian Army recorded fewer than 300 fatalities in incidents related to militancy – a fall from 375 in 2010. In 2001, when India and Pakistan appeared on the brink of a nuclear war over Kashmir, the body count was 4,507, of whom 1,067 were civilians.

Kashmiri political leaders say that militancy no longer holds glamour for the state's disaffected youth.

"In the 1990s thousands of young men crossed into Pakistan to undertake training in firearms and explosives in camps run by the Pakistani army. But now it's next to zero," said Peerzada Muhammad Sayeed, the education minister, from the state's winter capital of Jammu.

Lieutenant General Syed Ata Hasnain, the Army’s Corps Commander in the state, said several important leaders of the largest terrorist group operating in Kashmir, the Hizbul Mujahideen, were killed in 2011. Among them was top commander Mushtaq Khan, shot dead in the Gutlibagh forests in central Kashmir on October 12th. Also, quite a few Pakistani terrorists working for the banned Lashkar e Taiba were arrested or killed.

But that does not imply that India is now popular among Kashmiris, analysts say.

Iftikhar Gilani, a respected Kashmiri journalist whose Urdu-language book details his ordeal in New Delhi's Tihar Jail, where he was held in 2002, says, "A dangerous situation is simmering below the apparent peace. Pakistan's neutralisation does not imply the Kashmiris will give up dreaming of independence."

In 1947, Pakistan and India both laid claim to the former kingdom of Jammu and Kashmir, which was a vassal of Great Britain. The two countries have fought three wars over Kashmir since, but the logjam has defied a solution.

"Winning the peace," said security adviser Menon, will be an "uphill task".

India maintains more than half a million security personnel in Kashmir. In addition to army, paramilitary and police elements, there is also a strong intelligence presence focused on counter-terrorism.

Kashmir Chief Minister Omar Abdullah advocates demilitarisation of the state. As a first step, he has demanded that New Delhi lift the Armed Forces Special Powers Act, which empowers security personnel to shoot people on mere suspicion and detain suspects for prolonged periods.

Home Minister P. Chidambaram agrees with Abdullah, but the defence establishment is reluctant.

Gen. Hasnain declared on December 16th that the present thaw in Kashmir militancy could be temporary. "Pakistani terrorists presently engaged in Afghanistan may at any time be redirected to Kashmir," he said.

However, separatist leaders, who had long looked to Pakistan for support, are now increasingly talking aloud of dealing directly with the Indian government. In a significant departure from his old position, Syed Ali Shah Geelani, formerly the most pro-Pakistan of the separatist leaders, declared his willingness for dialogue with New Delhi.

In 2010, after Indian security forces fired upon a largely non-violent protest and killed 91 people, New Delhi decided to set up a new conflict resolution framework.

Accordingly, a three-member "interlocutors' panel" was formed comprising journalist Dilip Padgaonkar, academic Radha Kumar and bureaucrat M.M. Ansari.

The group spent over a year in the troubled state and interviewed more than 600 people. It submitted its report to the government in October. Though its contents are secret, sources hint that New Delhi may try a peace offensive in Kashmir in 2012.

"It may be a new crossroads for Kashmiris," Padgaonkar said.