Every admission system is unfair in some way but tests are a yardstick everyone understands and can optimize for. In India they publicly post the list of admitted students and their marks. Richer students may benefit from higher-quality test coaching but a) that happens today anyway and b) the Internet will ensure rapid dissemination of test-prep strategies for cheap or free
The other downside is it might give you a more, for lack of a better word, boring student body at the higher levels. Fewer non-academic interests and achievements because every bit of spare time in high school was spent on studying.
I thought the American system sounded better when I was a high-schooler in India with not good but not great marks ("surely they'd recognize my specialness despite my lower scores, even if these hidebound colleges in India won't!") but it does leave more room for implicit bias.