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Different kinds of social institutions, ranging from the family to the market, can bring people together, create strong collective identities and strengthen social cohesion. The very same institutions can also be sources of inequality and exclusions. In Indian context, the term 'diversity' emphasizes differences rather than inequalities. When we say that India is a nation of great cultural diversity, we mean that there are many different types of social groups of communities living here. These are communities defined by cultural markets such as languages, religion, sect, race or caste. When these diverse communities are also part of larger entity like a nation, then difficulties may be created by competition or conflict between them. Cultural diversity can present tough challenges. The difficulties arise from the fact that cultural identities are very powerful they can arouse intense passions and are often able to mobilise large number of people. The challenges of cultural diversity can result in communal riots, demands for regional autonomy, caste wars. The major challenges that diversity poses in India - issues such as regionalism, communalism and casteism. The concept of 'community identity' is closely associated with cultural diversity based on birth and 'belonging rather than on some form of acquired qualifications or 'accomplishment'.

Cultural diversity refers to:

Different social groups and communities living together

The correct answer is Option (1) → Different social groups and communities living together

Cultural diversity refers to **different social groups and communities living together**. It emphasizes the presence of various cultural groups within a society, including differences in languages, religions, sects, races, or castes. Cultural diversity highlights the richness of cultural heritage and traditions within a community or nation.