The House of Lords has voted twice for legal protection to be given to the estimated 400,000 Dailts - so-called untouchables - who live in the UK.
MPs overturned the first Lords vote, but after peers again backed the plan on Monday, there has been a rethink.
Mr Cable said caste would in future be treated as "an aspect of race".
Keith Porteous Wood, of the National Secular Society, said: "We are delighted that the government has accepted that discrimination against caste should enjoy the same statutory protection as all other forms of protected characteristics.
"This is a victory for the Lords and their emphasis on protecting human rights."
Campaigners had said legislation was needed because thousands of people suffered abuse and prejudice because they were considered low caste.