The land rights of the "Sirdars" were cancelled and their lands were annexed by the state. During his tenure as Diwan-Regent, Madhava Rao also effectively re-organized the army, schools, courts of law and libraries. He also introduced a lot of town-planning measures. Madhava Rao resigned in September 1882 due to disagreements with the new Maharaja Maharaja Sayajirao Gaekwad III. He retired to his home in Mylapore on pension. Madhava Rao involved himself in politics in the later years of his life. He joined the Indian National Congress in 1887, two years after its formation. He served as the President of the Reception Committee during the 1887 Madras session. In 1888, he was offered a seat in the Imperial Legislative Council by the then Viceroy of India Lord Dufferin but Madhava Rao declined the offer on ground of health. While delivering the inaugural address during the 1887 session, Madhava Rao described the Indian National Congress as  However, at the same time, he warned that  Madhava Rao resigned from the Standing Committee in 1889 due to differences with other members over the resolution passed on reformed legislative councils. In his later years, Madhava Rao strove to reform the educational system. Even while serving as Diwan of Baroda, Rao was made a fellow of the Madras University. He campaigned in support of women's education and attacked child marriage. He also criticised the literal interpretation of Hindu "shastras". However, Madhava Rao was, till the end, a pacifist and was moderate and unreactionary in his views on social reforms. In 1885, at the request of the then Governor of Madras, Mountstuart Elphinstone Grant-Duff, Madhava Rao presided over the Malabar Land Tenure Commission. In 1887, he presided over the convocation of the Madras University. In December 1887, Madhava Rao presided over the inaugural session of Indian National Social Conference. Madhava Rao took a liking for British sociologist and political theorist Herbert Spencer and spent the last days of his life studying his works. He contributed articles to newspapers on a variety of topics ranging from politics and religion to astronomy. Under the pseudonyms "Native Thinker" and "Native Observer", Madhava Rao wrote opinion pieces on the German occupation of Africa and on the dress code to adopted by Hindu women in public. He forwarded his article on the German occupation of Africa to the German chancellor Bismarck who replied with a letter of acknowledgement and appreciation.