Mushtaq Ahmad, a state government employee, was shot dead hours after he was abducted late on Wednesday from the village of Gagarsula in Udhampur district of southern Kashmir, police said.
Three others from the same village were also abducted, an Indian police spokesman said, adding that one of them managed to escape while the fate of the other two was not known.
Troops, supported by police, are searching nearby forests for the civilians.
Indian security forces recovered 32 kilograms of white plastic explosives, known as research developed explosives (RDX), and nine hand grenades in the Wulyan forests of Kupwara
district in the north of the area overnight, police said.
Pakistan offer hailed
Meanwhile, Pakistan's offer to set aside long-standing demands for a plebiscite in disputed Kashmir opens up a new window of opportunity which India must address, Indian diplomatic and political commentators said.
The Indian government offered no immediate reaction to
Pakistan President Pervez Musharraf's suggestion, in an interview with Reuters on Wednesday, that he was ready to be "bold and flexible" in a bid for peace between the nuclear-armed neighbours.
Former Indian foreign secretary J N Dixit said Musharraf's offer on Kashmir marked an "important shift in policy" less than three weeks before an important South Asian summit.
"He is signifying there will be flexibility in the Pakistani negotiating position," said Dixit, who has also served as India's envoy to Islamabad.
"We should be able to respond with flexibility and see if we can find a middle ground."
Indian Prime Minister Atal Behari Vajpayee, who said earlier this year he would make a final push for peace with Pakistan, will make a rare visit to Islamabad in early January for the summit.
"Musharraf's offer on Kashmir marks an important shift in policy. He is signifying there will be flexibility in the Pakistani negotiating position"
J N Dixit,
Former Indian foreign secretary
But Indian officials have so far ruled out any bilateral talks on the margins of the summit, saying Pakistan must first stop supporting militants fighting Indian rule in Kashmir.
In the interview, Musharraf offered flexibility on Kashmir. "If we want to resolve this issue, both sides need to talk to each other with flexibility, going beyond stated positions, meeting halfway somewhere," he said.
"We are for United Nations Security Council Resolutions," he added. "However, now we have left that aside."
"Musharraf is really trying to prepare his country and us also for resumption of meaningful dialogue," said Indian political
commentator Prem Shankar Jha.
"He is also responding to the fact that the world around us has changed and there is a great desire for peace and need to leave this conflict behind."
New Delhi controls around 45 percent of Kashmir, Pakistan a
third and the remainder is controlled by China.