Well, yes and no. Grades went out of favor because there actually is a considerable body of research pointing to the fact that grades are harmful. What they do is not simply pointing out weaknesses but establishing a ranking. One schildert is suddenly 10% "better" than another because of that seemingly objective number below the test.
It reduces children (who are sensitive to messages like that) from a full person with a unique character to their performance as tested. If you haven't yet developed the necessary cynicism to deal with this onedimensional assessment of personhood, you will quickly. If that is actually desirable is another matter.
Why is it that different for kids that need to know, for example, that they suck at multiplication tables and so need to improve for their next exam?
Sometimes we overthink things way too much.