Market Segmentation is a way to deliver value. If you manufacture a Rs. 3000 mobile or a Rs. 50,000 mobile you cannot sell it to the entire population. There is no single product or a service (or anything) that suits all. So you create market segments, so that you can identify your “addressable market”. You avoid misdirected effort and increase returns for your effort – at the same time you offer something targeted at and suitable for that particular market segment.
The same is true about Caste. Caste in society is equivalent to segmentation in the market. What you use it for is individual’s choice. But you cannot cater to entire population without creating smaller, manageable segments.
If government wants to do some good for everybody in the country, you cannot target entire population in 1 go. The needs, expectations and suitability is different. So you need to “segment” population. Create small constituency of beneficiaries. There are several ways to do so. One could be Caste. Division of labor was the primary reason why caste came into existence and remained relevant. However in the modern era we do not need caste for division of labor because anybody can and should take up any profession where he/she can contribute or where his or her relative competitive advantage lies.
The caste may get redundant, by lay/force or by evolution of society; but it would get replaced by some other form of “segmentation” – based on income levels, education levels, lifestyle, or some other factors. But “caste” in the sense of “segmentation” is indispensable.