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Buddhi is a feminine Sanskrit noun derived from the same root (budh – to be awake; to understand; or to know that is gyan) as its more familiar masculine form Buddha. Buddhi is a composite of mind and ego, and principally the faculty of I-sense, which derives the sense of individuality (atman), a sense or principle of pure ego, and which is due, in part, to the reflection on it, as an object seen (pramana), i.e., the self-effulgence and illumination of Purusha in the witness brings I-sense and Buddhi into the awareness of the mind.

Both the mind and ego are regarded as instruments of reception in Buddhi. By itself, Buddhi is not a single principle upon which one could meditate, due to its composite nature. It cannot bring the mind to an arrested state by doing so. Technically, both the mind and ego originate in Prakriti and from Purusha, emerge into materiality as a function of the 3 Gunas as the most subtle objects in their pure sense. Discriminative in nature (बुद्धि निश्चयात्मिका चित्त-वृत्ति), which is able to discern truth (satya) from falsehood and which makes wisdom possible. It corresponds to the Platonic conception of nous and plays a central role in salvation within Hinduism, Buddhism and Yoga. Buddhi plays a central role in the attainment of liberation (moksha) or enlightenment (bodhi).

Buddhi makes its first scriptural appearance in the Katha Upanishad (I,3) where it is compared in a famous simile to the driver of a horse and carriage, where the reins held by the driver represent the lower mind (manas); the horses represent the five senses (Indriya) and the carriage itself - the body. Ontologically, buddhi is equivalent to hiranyagarbha and is to individual living souls - jivas - as hiranyagarbha is to the insentient phenomena of the universe. Buddhi is that dimension (or pole) of the heart/mind (chitta) which is attracted to Brahman. The other 'pole' of chitta is called manas and is characterised by an attraction to form and ego-construction or ahamkara (or the mutative or changing ego). Manas, through identification with matter and desire for sensual pleasures (kama) causes the incarnation of Brahman into material existence as an individual soul. Buddhi, through wisdom (prajña) and discernment (vitarka), leads an incarnate soul in the opposite direction dissolving identification with material phenomena with cessation of corresponding worldly desires (vairagya) and eventually attaining liberation (moksha).

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