Definitions of literacy vary, obviously depending on their context:
Cambridge Dictionary: 1) The ability to read and write and 2) knowledge of a particular subject, or a particular type of knowledge
Australian Curriculum v8.4: Literacy involves students listening to, reading, viewing, speaking, writing and creating oral, print, visual and digital texts, and using and modifying language for different purposes in a range of contexts.
UNESCO: Literacy is a continuum of learning and proficiency in reading, writing and using numbers throughout life and is part of a larger set of skills, which include digital skills, media literacy, education for sustainable development and global citizenship as well as job-specific skills.
It seems impossible to divorce the idea of literacy being rooted in a capacity for reading and writing from the modern-day expectation that literacy denotes general competency. In order to attain competency in a given area – for example, in navigating digital resources – it is necessary to have a command of the lingua franca it is assessed in.
An example I give to students is in coding. At a young age, where block coding is the first step, some students think that drag-and-drop makes it an easy process, and that spelling mistakes or errors in punctuation are few and far between. But when they dive a little deeper into Python or Java, and a function isn’t doing what it should even though they’ve copied it directly from another proficient coder’s file, debugging can be very difficult if they cannot understand what the debugging software is telling them to fix, whether it be a syntax or spelling or value error.
A real-life/post-education example is in science communication. A student could become the world’s most renowned cardiovascular surgeon, performing groundbreaking procedures that others would benefit from knowing about, but if they cannot write up the research clearly and concisely, their discoveries will go unnoticed.
Automechanics, farmers, bakers – name a trade, and they will need a functional degree of traditional literacy to be literate in that area of expertise. Automechanics need to be able to read manuals and interpret diagrams, farmers need to be able to reference data tables about weather and raw material sale prices. Bakers need to be able to do both. All of them need to be able to read, interpret, and apply knowledge about occupational health and safety, business management, and taxation.
Therefore I present my definition.
Literacy: the capacity to read, interpret, write, and apply knowledge acquired from a variety of resources in a broader area of expertise, especially as relates to real-life contexts.
References:
https://dictionary.cambridge.org/dictionary/english/literacy
https://www.unesco.org/en/literacy/need-know