Under Nizam Mir Mahboob Ali Khan, Hyderabad, the historic Viceroyalty of the Deccan, occupied a unique position in the structure of the British Indian Empire, and was recognised as the most distinguished of the 'first class' states ruled by Indian Princes. Its territory, only a little less than one-third of the entire area of the Indian States, was two-thirds the size of France and twice the size of England. By Muslims both in the sub-continent and in the outside world it was looked upon as the last heir of the empire of the Great Mughals.
The Hyderabad to which Nizam Mir Mahboob Ali Khan himself succeeded was largely the creation of Sir Salar Jung, during whose ministry of nearly thirty years it was brought from chaos to an organised polity. Its revenue, judicial and police services were reconstructed on the lines of the British Indian Provinces; encouraging progress was achieved in public health, higher education and public works. Hyderabad was flooded with prosperity during the ruling period of Nizam Mir Mahboob Ali Khan. During this time he introduced the installation of electric power, established of railways, telephone lines and telegraph cables and also established schools and colleges. During this time, for the first time a library was established in Hyderabad.
Nizam Mir Mahboob Ali Khan must be credited with a determined effort to cleanse these augean stables of corruption that was developed earlier to his succession. Following the advice tendered to him by Lord Ripon at the time of his installation, he began earnestly and sincerely to tackle the knotty problem of Hyderabad finances. Soon after his assumption of power the Nizam had replaced the Peshkar's ministry by that of Mir Laik Ali Salar Jung II. But the new regime also failed to satisfy the Nizam.
It is obvious that Nizam Mir Mahboob Ali Khan's attitude towards the maladies of his State was not that of a mere onlooker. The Nizam, in the words of Lord Dufferin, was determined to take the State along the road of modern progress by improving the material welfare and happiness of the millions entrusted to his care. With the help of Mehdi Ali, a veteran statesman who saw that an authoritative definition of the powers to be exercised respectively by the Nizam, the Minister and the Council of State needed to be made, His Highness formulated certain 'Emergent Rules'. In these he clearly laid down that a quarterly return of the debt should be submitted, in which the real amount of debt should be shown and the receipts of the balance shown in such detail that it can be seen on what amount only interest is still due, and how many items can be disposed of, both principal and interest. Further, he added that there must be no fresh transactions with the sahukars or bankers without giving me infor-mation thereof.
Unfortunately the Nizam's scheme for the regulation of the finances of the State proved premature. Under the next minister, Basheerud Daulah Nawab Sir Asman Jah, the finances of Hyderabad relapsed into utter chaos. The opponents of the Nizam imputed the financial crisis to his personal extravagance: but the attacks were foiled by the Resident, Sir Dennis Fitz Patrick, a highly conscientious man of great integrity who had the Hyderabad accounts thoroughly examined by actuaries. The result of this thorough investigation was embodied in the form of the Qanunchai-Mubarak, the new Constitution of Hyderabad, which not only demarcated the powers of the Nizam, the minister and the Cabinet Council, but sought to remedy the defects which had come to light after the mismanagement of the finances during the ministry of Sir Asman Jah. The third part of the Qanuncha was entirely devoted to financial reorganisation. In order to effect the financial reforms enunciated in the Qanuncha the Government of India placed at the disposal of the Nizam's Govern-ment the services of an experienced officer. The Nizam, too, assured the Viceroy, Lord Elgin, that he entirely agreed with him that the finances of his state should be placed in a thorough order and that he considered that the administration of the finances on sound principles was a primary duty of the Minister and one for which he must accept responsibility. Accordingly, His Highness itemized the duties of the new minister, Nawab Vikarul-Umara that first and foremost he must succeed in improving the financial condition of the state; secondly, he would be held responsible for regular work in the Cabinet Council and for promoting harmony and amity among its members. Further, to make it quite certain that the minister would abide by the spirit, and fully implement the Regulations of the Qanuncha, His Highness made him sign an Ikrarnama or agreement to that effect.
In spite of the Nizam's anxiety that the Quanunchai-Mubarak with its rules and regulations should be fully implemented, its purpose was not fulfilled because of the disinclination of the Minister to abide by it. Nawab Vikarul-Umara, like his predecessor Sir Asman Jah, re-garded such rules as an encroachment on his rights. Barring Maharaja Kishen Pershad, all the ministers of Nizam Mir Mahboob Ali Khan aspired to exercise the extensive powers which Salar Jung I had wielded as Regent, so that the Nizam would be relegated to a secondary position in his own State.
Accordingly, the minister with the connivance of the Resident, T. C. Plowden, started openly to decry the regulations of the Qan-uncha as unworkable. Large sums of money were drawn and disbursed without the knowledge of His Highness, with the result that the treasury was depleted. T. C. Plowden in his dispatch to the Government of India on Crawley's report admitted that the financial condition of Hyderabad was not so desperate as to demand direct intervention by the Gov-ernment. He was of the opinion that, if the Nizam's personal expenses could be kept within reasonable limits, the income of the State would suffice for its expenditure and it would be possible, by judicious and persevering advice, to induce His Highness' Government to impose a stricter control upon new expenditure and to effect such minor economies as would maintain an equilibrium between income and expenditure. Nizam Mir Mahboob Ali Khan was known for his excessive personal expenditure and for this reason, the Resident considered that the first step towards setting things right would be to classify, with His Highness' assent, the heads of expenditure in order to determine which items the Nizam should retain under his personal control, and which should be met from the revenues of the State. The Resident stated that such a plan would go a long way towards setting the financial relations between the Nizam and his Government upon a proper footing.
Unfortunately in 1898 the State suffered two terrible natural calamities, an outbreak of plague and a disastrous famine, the like of which Hyderabad had never experienced. These calamities and the relief measures required to fight them took further toll of the finances of the State. The relief measures taken under the personal directions of the Nizam were thoroughly effective, and indeed would compare favourably with the efforts of any modern Welfare State.
Hyderabad's financial situation, as the Nizam stated, could not be attributed to any one single cause; there were quite a number of factors which had contributed to the budgetary deficit. In the first place, the recent famine conditions had left large revenue arrears which had not been calculated accurately, although for the last two years the Nizam had been drawing them to the attention of the minister. Secondly, the minister had not fulfilled his promise to wind up the Council of Nobles, but had continued to increase expenditure on it. Thirdly came the repayment of the old debts, outstanding for the last sixty or seventy years, which was not being taken in hand. It would be wise, the Nizam thought, to deal with these repayments when the finances of the State were sound, and to postpone the payment of installments for the time being while the financial position was difficult. A further factor in the existing stringency was the heavy investment entailed in the opening of the new railway lines and in other public works, all of which promised to increase State resources in the future.
The reigning period of Mir Mahboob Ali Khan had enabled Hyderabad to become wealthier and advanced state. He died at the age of forty five.