Why does renal artery stenosis lead to activation of Renin-Angiotensin system?
So why does narrowing of the renal artery cause a decrease in blood pressure, and not increase?


It doesn't. It causes an increase.

If the blood flow to the kidney is decreased for any reason (for example, hemorrhage or dehydration), the kidney is one of the organs that will protect it's perfusion by causing an increase in BP through the renin-angiotensin-aldosterone system (RAAS).

Very briefly: decr. blood flow -> renin secretion by juxtaglomerular cells -> conversion of serum Angiotensinogen into Angiotensin I (+ ACE) -> Angiotensin II => elevated BP (by a host of mechanisms).

If there is renal artery stenosis, the kidney will try to compensate for this (locally) reduced blood flow by activating the RAAS. The kidney doesn't 'know' that the blood flow/pressure is only locally reduced. It will cause systemic hypertension as a way to increase it's blood flow.

Atherosclerosis is a whole different ball of wax.