The term "Sanskrit" was not thought of as a specific language set apart from other languages. Instead it was a particularly refined or perfected manner of speaking. Knowledge of Sanskrit was a marker of social class and educational attainment in ancient India. This language was taught mainly to members of the higher castes, through close analysis of Sanskrit grammarians such as Panini.
Sanskrit, as the learned language of Ancient India, thus existed alongside the Prakrits or the vernaculars. Consequently, it existed alongside the contemporary modern Indo-Aryan languages.
Further, Sanskrit, as defined by Panini, had evolved out of the earlier "Vedic" form. The beginning of Vedic Sanskrit can be traced as early as 1500-1200 BCE. Scholars often distinguished Vedic Sanskrit and Classical or "Pannian" Sanskrit as separate 'dialects'. Though they were quite similar, they differ in a number of essential points like phonology, vocabulary, grammar and syntax.
Vedic Sanskrit was the language of the Vedas. The Vedas were a large collection of hymns, incantations or Samhitas. Samhitas were the theological and religious-philosophical discussions in the Brahmanas and Upanishads. Modern linguists consider the musical hymns of the Rigveda Samhita to be the earliest, composed by many authors over several centuries of oral tradition.
The end of the Vedic period was marked by the composition of the Upanishads. These Upanishads formed the concluding part of the Vedic corpus in the traditional view. However, the early Sutras are Vedic, too, both in language and content. Around the mid 1st millennium BCE, Vedic Sanskrit began the transition from a first language to a second language of religion and learning.
For almost 2,000 years, there existed a cultural order existed which exerted considerable influence. This influence, so exerted was across South Asia, Inner Asia, Southeast Asia, and to a certain extent, East Asia. A significant form of post-Vedic Sanskrit is found in the Sanskrit of the Hindu Epics namely the Ramayana and the Mahabharata.
The deviations from Panini in the epics were generally considered to be on account of interference from Prakrits, or "innovations." They are not because they are pre-Paninean.
The decline of Sanskrit language used in literary and political circles was probably due to the weakening of the political institutions that supported it. Additionally, by that time, there was heightened competition with vernacular languages seeking literary-cultural dignity. There was regional variation in the forcefulness of these vernacular movements. As a result, Sanskrit declined in different ways across the Indian subcontinent.
For example, in Kashmir, post 13th century, Kashmiri was used alongside Sanskrit as the language of literature. Sanskrit works from the Vijayanagara Empire failed to circulate outside their place and time of composition. By contrast, works in Kannada and Telugu flourished instead.
Despite this presumed "death" of Sanskrit and the literary use of vernacular languages, Sanskrit continued to be used in literary cultures in India. Thus, those who were able to read vernacular languages could also read Sanskrit.
Hence, Sanskrit was no longer used to express changing forms of subjectivity and sociality embodied and conceptualized in the modern age. Instead, it was reduced to "re-inscription and restatements" of ideas already explored. Further, any creativity in Sanskrit was restricted to religious hymns and verses.
When the British imposed a Western-style education system in India in the nineteenth century, knowledge of Sanskrit and ancient literature continued to flourish. By this time, the study of Sanskrit changed from a more traditional style into a form of analytical and comparative scholarship. This was very much similar to that of Europe.