Modi do not want to find a middle ground.
The reality is Pakistan does not have any leg to stand on. Their only desire for the territory is like the Russians for Georgia or Crimea and Ukraine; Russians live there. Pakistan wants the place because Muslims live there.
That is lame. They should backed out of the occupied lands, let the people, who are from distinct groups, religions and cultures, forge their own state in some form of federal republic.
That unfortunately will not happen with India knowing relinquishing that region means it will be held hostage to waters from one of its main rivers. I can understand India's motivation.
They received the territory fair and square as america got Texas. Someone with authority signed it over when these states were consolidating in post colonial times.