This paper critically examines the effectiveness of India's caste-based affirmative action policies (reservation system) in dismantling caste hierarchies and promoting social equality over seven decades of implementation. Through analysis of empirical data on social mobility, educational outcomes, and caste identity persistence, this study argues that reservation policies have achieved limited success in their primary objective of caste dissolution while generating significant unintended consequences for institutional excellence and meritocratic advancement (Deshpande, 2013; Weisskopf, 2004). The analysis demonstrates that caste identity and hierarchy remain deeply entrenched in social structures despite extensive preferential policies, suggesting fundamental limitations in state-directed approaches to social transformation (Thorat & Newman, 2010). Conversely, market-driven economic liberalization and capitalist development have facilitated more substantial changes in caste-based behavioral patterns, particularly in urban employment and consumption domains (Jodhka & Newman, 2007; Kapur et al., 2010). The paper employs cost-benefit analysis to evaluate reservation policies' net impact, examining trade-offs between representation goals and institutional performance across education, healthcare, and public services. This research contributes to ongoing debates about affirmative action effectiveness, offering empirical grounding for policy reform discussions while acknowledging the complexity and contested nature of these issues. The conclusion advocates for policy recalibration emphasizing market-based solutions alongside targeted interventions addressing root causes of disadvantage rather than identity-based preferences alone.