"I don't agree that situation is bad. I think the situation has dramatically improved over the last two years... The people are looking to jobs, to investment, to growth, to opportunities, to goods and to services," he said.
Referring to ongoing infrastructure projects in areas like tunnels, railways and roads, the Minister said, "I think a lot of money is being given by the government for investment in Jammu and Kashmir.
He admitted that private sector investment is lacking in Jammu and Kashmir. "I agree that more investment should flow into Jammu and Kashmir," he added.
Referring to last week's visit by top industrialists, including Ratan Tata and Kumar Manglam Birla, to Kashmir, the Minister said a beginning has been made to bring private sector investment into the state.
"I think a beginning has been made. Last week four or five top industrialists of India went to Kashmir and assured them that they will bring investments into Kashmir," he said.
The Finance Minister also said that banks have been asked to encourage businesses to invest in the state. "I think the results will be known in the near future," he said, adding every effort is being made to get the private sector into the state.
While law and order situation has dramatically improved, Chidambaram said, "It's still some way to go and I think the state government must address the issue of law and order very firmly."
Chidambaram, who was the country's Home Minister before holding the Finance portfolio, said: "Only a very small section continue to talk about secession and freedom and that kind of thing. There is no resonance for that among the people."
He also said there is a programme to impart skills so that the youth can find skilled jobs, both within and outside Jammu and Kashmir.
The minister also said that youth should not hesitate in taking up jobs outside the state.