The senior Congress leader Azad, who visited Kashmir between September 20 and September 24, and later Jammu for two days submitted a report on the situation to the apex court.
On September 16, the Supreme Court had allowed Azad to visit J&K after his two attempts to go there were foiled by the authorities.
Addressing a press conference, he said people in Kashmir were facing immense difficulties because of restrictions and the economy was suffering.
The Kashmir's economy was dependent on four factors, including tourism, but due to restrictions, the condition of people had become pathetic, he said. The migrant labourers too were facing difficulties, he added.
Azad visited Srinagar, Baramulla, Anantnag and Jammu during the six-day tour.
"There is an atmosphere of fear," he said, adding fruit sellers, transporters, boat and taxi operators and daily wagers all were in a bad condition.
Alleging that he himself was under the constant watch of security agencies, Azad said his visitors were harassed by intelligence agencies.
The former Chief Minister said people in Jammu were also facing difficulties "because economy of this region is dependent on Kashmir". Supplies to the Valley, routed through Jammu, were hampered due to restrictions.
"The local leaders are afraid of Delhi and are not speaking up," the Congress leader said.
( With inputs from IANS )