InitialiseSettings.php says "inactive" group is "for show only", but I don't think there're any point to show a list of inactive users. Also there're already Special:BlockList. Adding users in "inactive" group does not prevent them from editing ($RevokePermissions).
If we want to remove this group we should also removed related code from https://git.wikimedia.org/blob/mediawiki/extensions/DisableAccount/9889477e42fa3f7a5d93eaa52fa0c52e72ae02fa/DisableAccount_body.php (just one line)