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Probationary Sub-Inspector Deepak Sharma, who suffered head injuries during the encounter, died during treatment on Wednesday, they said, adding that a special police officer was also injured.
Acting on a tip-off, a team of officials chased gangsters Vasudev, a key accused in a murder case registered at Ramgarh police station, which led to an exchange of fire near the Government Medical College hospital around 10:30 pm on Tuesday, a police spokesperson said.
Vasudev was killed in the encounter while one of his associates was injured, she added.
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Sharma died during treatment on Wednesday. His body has been taken to GMC hospital in Kathua, she added.