The third chapter is the first to exclusively address core linguistic issues by comparison of the ancient Indian and modern Western traditions. It addresses rule interaction, an issue which has been a core topic of research in Pāṇinian linguistics, and which has also been a central issue in the development of modern phonological theory, in many respects driving theoretical developments over the last fifty years. A central focus is on the Elsewhere Principle, also known as 'Pāṇini's principle', and on the outworking of this fundamental principle in different phonological theories including Lexical Phonology, Declarative Phonology and Optimality Theory.