Well, caste may be the simplest indicator of socio-economic status in the Indian society, atleast in much of rural and semi-urban Indian society. And so in a country where any kind of false certification (including false proofs-of-annual-income) may be produced in a dirt-cheap budget, caste may be an effective indicator for affirmative action. But the problem with it is.....as an individual of a higher caste one feels terribly penalized for having born in a higher caste. Its one of those things where interests of an individual are in exact conflict with the interests of society in general.
The solution? I can think of one: Better Information Systems that keeps track of beneficiaries of the action and thus making sure that their progeny are treated normal.