A police spokesman said five civilians were also injured when the bomb went off in the northern town of Baramulla. One of the injured later died in hospital.
The remaining four injured people were in a serious condition and shifted from a hospital in Baramulla to another in Srinagar.
No militant group has claimed responsibility for the blast, but police said it was triggered by suspected militants trying to target an Indian army convoy which had passed by a little earlier.
The spokesman said the bomb was hidden under snow and the blast occurred when a snow cleaning machine was clearing the road in the morning.
The explosion brought the busy market area to a halt, with all shops and businesses immediately downing shutters.
Police cordoned off the area of the explosion and launched a search operation for the culprits.
Observers said the blast was likely to be a setback for the Indian government’s peace efforts.
On Wednesday, India announced that a retired bureaucrat, N.N. Vohra, would become New Delhi’s envoy for dialogue with Mujahideen. —AFP