It was an "unprovoked and intense stone pelting" by no less than 100-120 protesters, said the Indian defence ministry, adding that the stone-pelters increased in number very quickly.
"The crowd surrounded an isolated portion of the convoy consisting of four vehicles," said the ministry's spokesman Colonel Rajesh Kalia. "Considering the extreme gravity of the situation, the army was constrained to open fire in self-defence."
State police have registered a formal complaint against the army, which is controlled by the federal government, over the incident and ordered a probe. Jammu and Kashmir's Chief Minister Mehbooba Mufti has contacted the centre's Defence Minister Nirmala Sitharaman and sought a detailed investigative report.
Local reports allege that the incident is yet another example of Indian forces opening fire at the slightest provocation. One witness told the Greater Kashmir daily newspaper that the army's actions were "horrifying" and people fled the area screaming.
Separatist groups in Kashmir immediately called for protests across the state after the two civilians' deaths.
Tensions in Kashmir Valley – a heavily disputed territory between India and Pakistan and on which the two nuclear weapons-armed rivals have fought two major wars – have sharply escalated in recent years, primarily over protests against the presence and actions of Indian forces.
The southern part of Kashmir, particularly, has become a hotbed for militancy after the death of local militant commander Burhan Wani in July 2016. Wani was the poster boy of the Kashmir-based militant group Hizbul Mujahideen.
Incidents like these have precipitated the fragile atmosphere in Kashmir over several years.