The State of Hyderabad was founded by Nizam-ul-Mulk Asaf Jah in 1724. It was Zulfiqar Khan who had first conceived of the Plan of an independent state in the Deccan after the conquest of the Fort of Jinji. Through the generousity of Bahadur Shah, Zulfiqar Khan was appointed the Viceroy of the Deccan. He was allowed to stay at the capital while Daud Khan was to act as his Deputy.
When Farrukh Siyar came to power, the position of Zulfiqar Khan became shaky and ultimately he was killed in 1713. Chin Qilich Khan was appointed the Viceroy of the Deccan with the title of Nizam-ul-Mulk through the good offices of the Sayyid Brothers. He acted as Viceroy of the Deccan from 1713 to 1715.
He consolidated his position by diplomacy and war. He was displaced by Husain Ali, one of the Sayyid Brothers who was appointed the Viceroy of the Deccan. In 1720, the Nizam returned to the Deccan and seized the Viceroylty by defeating the nephew of Husain Ali. As Emperor Muhammad Shah was himself eager to break the hold of the Sayyids, he won over the Nizam to his side and confirmed him as the Viceroy of the Deccan. The Nizam had to go to the North because the Emperor wanted to stabilise his position by appointing him as the Wazir in 1722 and he remained as Wazir upto 1724.
The Nizam tried to put things in order but he was unsuccessful on account of opposition from the Emperor and his flatterers. His strict discipline provoked dislike and jealousy. The Nizam was extremely unhappy. As Wazir, he added Malwa and Gujarat to the Subedari of the Deccan. When the Nizam found that he was not liked in the court, he marched away to the Deccan without the permission of the Emperor.
That was not liked by the Emperor who appointed Mubariz Khan as the Viceroy of the Deccan and directed him to send the Nizam to the court, dead or alive. Mubariz Khan was defeated and killed by the Nizam who sent his head to the Emperor. The Mughal Emperor was obliged to confer on the Nizam the title of Asaf Jah and he also confirmed him in the Viceroyalty of the Deccan, in spite of the fact that the Nizam was very strong in the Deccan, he maintained a show of respect towards the Emperor.
The Nizam laid the foundations of the State of Hyderabad which he ruled with a strong hand. He never openly declared his independence from the Central Government but for all practical purposes, he acted like an independent ruler. He waged wars, concluded peace, conferred titles and gave Jagirs and offices without reference to the Central Government. He followed a policy of toleration towards the Hindus. He appointed Puran Chand as his Dewan. He established an orderly administration in the Deccan. He tried to remove corruption from the revenue department.
The Nizam had to face the challenge of the Marathas who under the leadership of Peshwa Baji Rao 1 were determined to collect Chauth and Sardeshmukhi from the six Soobaas of the Deccan and limit the power of the Nizam. The Nizam was an astute diplomat and a capable commander. He tried to divide the Marathas. He aroused the ambition of Senapati Trimbak Rao against Peshwa Baji Rao and refused to pay Chauth and Sardeshmukhi.
Baji Rao proved more than a match for him. He defeated the Nizam twice, first at Phalkhed in 1728 A.D. and next time near Bhopal in 1738. Both times he had to purchase peace from the Peshwa and agreed to pay Chauth and Sardeshmukhi besides other terms.
When the Marathas occupied Malwa, Bundelkhand and Gujarat, the Nizam stayed in the North from 1737 to 1740 at the request of the Mughal Emperor. He failed to settle anything with Nadir Shah in 1739 and went back to the Deccan. After that, he did not take part in the politics of Delhi. He died in 1748 A.D. at the age of 77. The Nizam was the first independent Ruler of I Hyderabad and he was also the most competent ruler of the Deccan.
After the death of the Nizam in 1748, there was confusion in the Deccan. Nasir Jang and I Muzaffar Jang contested the throne and took the help of the English and French Companies. The I interference of the Marathas in the politics of the Deccan and the rise of the State of Mysore under Haider Ali created more complications for the Rulers of Hyderabad. In the time of Lord Wellesley, the Nizam entered into a subsidiary alliance with the English East India Company and virtually became their subordinate ally.