Language
Language is a system that consists of the development, acquisition, maintenance and use of complex systems of communication, particularly the human ability to do so; and a language is any specific example of such a system.
Literacy
Literacy is traditionally meant as the ability to read and write. The modern term's meaning has been expanded to include the ability to use language, numbers, images, computers, and other basic means to understand, communicate, gain useful knowledge, solve mathematical problems and use the dominant symbol systems of a culture. The concept of literacy is expanding in OECD countries to include skills to access knowledge through technology and ability to assess complex contexts. A person who travels and resides in a foreign country but is unable to read or write in the language of the host country would also be regarded by the locals as being illiterate.