It was designed primarily as a defensive battle carry round for M79 gunners operating in such thick jungle or similar that they might have to engage close range bad guys without the rifle armed members of their team/squad being able to do that for them. Kind of like the M1 carbine compared to the alternative of a handgun -- the round isn't ideal, but it's preferable to drawing a 1911 from a leather flap holster and engaging with that at spitting distance.
(And I think it was designed on a pretty fast timeline due to an urgent sort of need, followed by the whole idea losing relevance once the M203 and its experimental predecessors started showing up on the scene. Had it been subject to more refinement and development, the end result might have been more impressive. The flechette round might have done just that, but I don't think I've ever heard much official info on it.)
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