The Ashtadhyayi is the central part of Paanini's grammar, and by far the most complex. Regarded as extremely compact without sacrificing completeness, it would become the model for later specialist technical texts or sutras.It takes material from lexical lists (Dhatupatha, Ganapatha) as input and describes algorithms to be applied to them for the generation of well-formed words. It is highly systematised and technical. Inherent in its approach are the concepts of the phoneme, the morpheme and the root. His rules have a reputation for perfection— that is, they are claimed to describe Sanskrit morphology fully, without any redundancy. A consequence of his grammar's focus on brevity is its highly unintuitive structure, reminiscent of modern notations such as the "Backus–Naur Form". His sophisticated logical rules and technique have been widely influential in ancient and modern linguistics.

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