This research paper is concerned about the impact of terrorist activities on the local economy of Jammu and Kashmir and it also studies the relation of instability and local industry since last ten years. Known for its extravagant and breathtaking beauty throughout the world, Kashmir has aptly been described as â€œThe Paradise on Earthâ€Ÿ. Kashmir is second to no place in the world as far as its natural beauty and rich cultural heritage is concerned. However tourism industry plays a vital role in Jammu and Kashmirâ€™s economy, alongside, unique handicraft, handmade items horticulture and energy sector are also of much influence. However, terror activities in Kashmir have become one of its greatest handicaps. The continual terror activities have unexceptionally impacted every socio-economic activity in Kashmir. And tourism is a sector that has unquestionably been the worst casualty of this continued political instability and social turbulence. Not only tourism but the allied sectors especially the Kashmiri art and craft have equally been hit. The present paper attempts to empirically study the impact of terror activities on Kashmir tourism.