I think they've iterated on the design a bit over the years, but my primary criticism is that it can be hard to distinguish that an input is, in fact, an input. I think Google has since changed their design to have a filled background or border, which definitely helps - but this particular implementation doesn't seem to do that (except when the input is disabled, which sort of defeats the point).
There's also a lot of problems around how the placeholders and labels work - particularly in distinguishing them from each other.
I think it strongly evokes a line on a paper form, which indicates a place where the user must fill out a field (and fits with the recurring paper metaphor). If I'd never used a computer before, I think I would figure this out based on the context clues.
So while it may not fit current UI paradigms, it might be better? I applaud Material Design for attempting to move things forward in this way.
The issue is that the computer screen is not a paper form. You can't just fill out forms wherever you see dotted lines/horizontal rules(hr tags). Unlike paper pages, most of the HTML pages are read only / not content editable.
There's also a lot of problems around how the placeholders and labels work - particularly in distinguishing them from each other.