I know the malonic ester is probably used to make propanoic acid or some carboxylic acid, and then joined to the methylnitrobenzene. But I just can't figure out what glues to the methyl. I know the nitro can be reduced to amine and bonded to a carboxylic acid, but then what about the ends?
This is a challenging question as we have so few details.
One method would be to convert the orthonitrotoluene into the benzyl bromide with NBS or another free radical bromination reagent. Then you could react the dimethyl malonate with sodium methoxide in methanol. Next react the sodium salt of dimethyl malonate with 2-nitrobenzyl bromide.
Then filter off the sodium bromide thus formed, next stir it with the product of reacting Merifield's resin with tris-2-aminoethyl amine to scavenge anyunreacted nitrobenzyl bromide. Next subject the mixture to hydrogenation with a palladium on carbon cataylst. This will convert the nitro group into an amine.
Next evapourate it down to form a oil, heat this to make the amine react with the methyl ester to form methanol and an amide. When you are done with this step. Then react it with dilute sodium hydroxide to convert the remaining methyl ester into the sodium carboxylate. Make it acidic again and it will decarboxylate to give you a cyclic amide.
For the next step I would convert the amide to a thioamide with Lawesson's reagent and then treat the thioamide with rainey nickel to convert it into am amine. Between some of the steps it would be a good idea to purify the intermidates, but this is how I would (off the top of my head) try to make the conversion. I suspect that there will be cheaper ways of making the final product.