The state of Hyderabad was founded by Nizam-ul-Mulk Asaf Jah in 1724. He was one of the leading nobles of the post-Aurangzeb era. He played a leading role in the overthrow of the Saiyid brothers and was rewarded with the viceroyalty of the Deccan.
From 1720 to 1722 he consolidated his hold over the Deccan by suppressing all opposition to his viceroyalty and organising the administration on efficient lines.
From 1722 to 1724 he was the teaser of the empire. But he soon got disgusted with that office as the Emperor Muhammad Shah frustrated all his attempts at reforming the administration. So he decided to go back to the Deccan where he could safely maintain his supremacy.
Here he laid the foundations of the Hyderabad State which he ruled with a strong hand. He never openly declared his independence from the central government but in practice he acted like an independent ruler.
He waged wars, concluded peace, conferred titles, and gave jagirs and offices without reference to Delhi. He followed a tolerant policy towards the Hindus.
For example, a Hindu, Puran Chand, was his Dewan. He consolidated his power by establishing an orderly administration in the Deccan on the basis of the jagirdari system on the Mughal pattern.
He forced the big, turbulent zamindars to respect his authority and kept the powerful Marathas out of his dominions. He also made an attempt to rid the revenue system of its corruption. But after his death in 1748, Hyderabad fell a prey to the same disruptive forces as were operating at Delhi.
The Carnatic was one of the subahs of the Mughal Deccan and as such came under the Nizam of Hyderabad’s authority. But just as in practice the Nizam had become independent of Delhi, so also the Deputy Governor of the Carnatic, known as the Nawab of Carnatic, had freed himself of the control of the Viceroy of the Deccan and made his office hereditary.
Thus Nawab Saadutullah Khan of Carnatic had made his nephew Dost Ali his successor without the approval of his superior, the Nizam.
Later, after 1740, the affairs of the Carnatic deteriorated because of the repeated struggles for its nawabship and this, provided an opportunity to the European trading companies to directly interfere in Indian politics.