The current paper characterizes skill mismatch in Indian labor market and finds the role of community identity in explaining the existence of skill mismatch measured by the difference between a laborer's education level and the educational requirement of a job (s)he is in. Such mismatch leads to inefficient allocation of resources asking for policy reorientation in both the education and labor sectors. This research agenda is inspired by the fact that network plays an important role in getting a job or being discriminated in the job market. Therefore if a community identity acts as an adverse (favorable) signal, people from that community should acquire more (less) education than the educational requirement for a job to compensate for the signal coming out of their community identities. This may lead to over or under education depending whether the community identity transmits an adverse or favorable signal. We find that both Muslim and SC/ST identity have positive significant impact on the probability of over education. We also find that in case of under education Muslim identity is positive significant while SC/ST is not. We calculate the extent of over and under education for different industries and the wage effect of over education which is found to be positive.