The Western Asset Management Co, a $453 billion investor, is slashing its Indian government bond holdings on concerns over the Citizenship Amendment Act (CAA) and the Jammu and Kashmir region which have compelled the economy to take a backseat.

The affiliate of Legg Mason Inc is transferring some of its funds into Malaysian and Chinese debt, claiming it has an ‘overweight’ position in India bonds, Desmond Soon, head of investment management for Asia ex-Japan said.

The company is of the view that the agitation against the contentious CAA has diverted the government’s attention away from the dwindling economy and the reforms required for its revival.

‘It certainly distracts Prime Minister Narendra Modi’s government from making the necessary economic policy and reforms to focus on the economy. We are in the process of reducing India somewhat,’ the report said.

Foreign holdings of Indian sovereign debt have dropped to near a three-month low, the report stated.

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