New Delhi, Jan 16 (IANS): The Western Asset Management Co is reducing its Indian government bond holdings on concerns over the Citizenship Amendment Act (CAA) and the Jammu and Kashmir region clouding the economic outlook.

The $453 billion investor, an affiliate of Legg Mason Inc, is diverting some of its funds into longer-dated Malaysian and Chinese debt, according to Desmond Soon, head of investment management for Asia ex-Japan, according to reports. It has an "overweight" position in India bonds.

The fund's view is that the protests over the controversial CAA may have temporarily taken the government's attention away from economic reforms. "It certainly distracts Prime Minister Narendra Modi's government from making the necessary economic policy and reforms to focus on the economy," Soon told Bloomberg, adding: "We are in the process of reducing India somewhat."

Foreign holdings in Indian sovereign bonds have slipped to their lowest in three years, the report said.

The initial market euphoria from Prime Minister Narendra Modi's re-election last year is wearing thin as economic growth stutters and a policy making it harder for Muslim migrants to get citizenship stirs protests. Foreign holdings of Indian sovereign debt have dropped to near a three-month low, Bloomberg said in the report.