This paper analyses the policy of reservation for lower castes in India. This policy is similar to that of affirmative action in the United States. The paper provides a brief overview of the caste system and discusses the types of groups that are eligible for reservation, based on data from government reports. The stance of this paper is that affirmative action has not benefited the lower castes due to contextual factors like low school enrolment and completion rates, and high dropout and failure rates. Also, continuous addition of more and more castes to the fold of reserved categories has diluted the positive impact of the reservation policy. This paper suggests that under-representation of any social group in educational institutions should be assessed with reference to sub-populations of secondary school completers and argues that, unlike Scheduled Castes and Tribes, Other Backward Castes are not markedly under-represented. Hence, the 27% quota declared by the government recently is not justified. The paper also highlights social, pedagogic, psychological and political issues involved in the policy of reservation, and suggests that quotas should be based on economic criteria rather than on caste considerations.