India's Caste/Varna System: An Economic System

The four inputs (factors) of production are land, labour, capital and knowledge. Efficiency can be achieved by specialisation. In ancient India, different social groups (Varnas) specialised in handling the different factors of production:

Varna	Factor of Production
Brahmana	Knowledge
Kshatriya	Land
Vaishya	Capital
Shudra	Labour

Thus the Varna/caste system was born, based on economic specialisation.

See The Origin of the Varna/Caste System.