Historical Background
India is divided into many endogamous groups, or castes and sub-castes, as a result of centuries of following Varnasrama Dharma, a social system which translates to "types" or "order". In olden times, "lower-castes" has limited access to education, jobs and other rights. But in the current period, person on the basis of his/her caste can't be denied the access to education, job opportunity or any other facility (given by constitution) on the basis of caste.
During the British Raj, some methods for upliftment of the backward among these parts of the population were introduced. These included reservations in the legislature and in government jobs. After independence, the Indian constitution, introduced provisions for reservations for the scheduled castes and tribes in government institutions in the 1950s, to give a fair reperesentation to the weaker sections of society. 22.5% of the seats in higher education institutes currently set-aside for Scheduled Castes (SCs) and Scheduled Tribes (STs).
The reservation system was originally supposed to last only for ten years. However, it has continued to this day. In 1989, then Prime Minister Vishwanath Pratap Singh accepted and implemented the proposals of the Mandal Commission, which recommended reservations for Other Backward Classes (OBCs). Many Indian states implemented the OBC reservations in their higher educational institutions, which led to protests by those belonging to "upper castes" and opposed to the quota system. However, a select few higher educational institutions - the IITs, IIMs, AIIMS, etc. - were kept out of the purview of the OBC reservations until now.
In some states (for example Uttar Pradesh, Tamil Nadu) where the quotas for SC/ST/OBC have been implemented, the quota amounts to 50% of the available seats in any medical, engineering or other institute falling under the state government. This includes even the unaided private colleges.
The necessity of reservation on basis of castes arises when we look into the occupational structure in contemporary India. In Indian municipalities, predominant number of workers (sweepers, waste management) belong to lower caste. Whereas when it comes to elite jobs like IAS, the percentage of lower caste people is utterly low.
See also: Indian caste systemRead more about this topic: 2006 Indian Anti-reservation Protests
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