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Hundreds of millions of people this weekend will exchange greetings for Diwali, the Hindu “festival of lights” that is India’s biggest holiday.

But for the first time, “Diwali mubarak” - or Diwali greetings - can be exchanged in Hindi and Tamil script over Yahoo’s new chat service aimed at the country’s growing population of internet users who will rely on non-English languages.

The launch of the chat service earlier this week reflects Yahoo’s efforts to tackle the linguistic complexities of expanding in India, which counts more than a dozen regional languages, not to mention thousands of dialects.

Yahoo aims to better compete with domestic rivals - such as online portal Rediff which recently launched a Hindi chat service - that are also ramping up local language services in India.

“The internet [in India] is still at an early stage,” said George Zacharias, managing director of Yahoo India. “The next big growth in India will come from local language users.”

English and Hindi are India’s two main languages, but there are many regional languages with their own dramatically different scripts including Tamil, Kannada and Malayalam spoken in the south, and Bengali, Punjabi and Gujarati in the north.

There are 70m-80m English speakers out of India’s 1.1bn-strong population and many also do not speak Hindi.

Yahoo’s local language service allows computer users with English-language keyboards to type phonetically in Hindi and Tamil and have their words automatically converted to these scripts.

It plans to include more Indian languages in its chat service over the next six months and will eventually offer local language email.

India claims about 37m internet users, representing a 54 per cent jump from 25m in 2004, according to the Internet Service Providers’ Association of India (ISPAI). Of those, 23m are active users and about 20m are familiar with English. Yahoo’s services are used by 85 per cent of India’s active internet users, according to a report from research firm JuxtConsult.

Yahoo offers email in 35 languages worldwide, but India poses a unique challenge because local language keyboards are not mainstream, unlike in other countries.

While India’s PC penetration is just 2 per cent compared with 60 per cent in developed countries, ISPAI projects 54m internet users in 2008.

That figure does not factor in potential internet usage among India’s mobile phone market of 130m subscribers, which is expected to reach 500m by 2010.

Yahoo’s roll-out of new services in India, including a test version of faster, easier-to-use email, is part of its strategic push in the country.

Yahoo and Silicon Valley venture capital firm Cannan Partners this summer invested $8.65m in start-up matchmaking website Bharatmatrimony.com. Last year Yahoo increased its team of software developers from 800 to 1,000 in its Bangalore-based research centre, the largest outside of the US.

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