S. R. Faruqi:

[SRF discusses both this ghazal and the following, formally identical one, {1659}, together in {1658,1}.]

By means of God's qualities 'outside' and 'inside', he has created a new idea: that when passion arrives in the heavens, then it appears in the form of the 'lofty realm' (=the inside); and when it comes to earth, then it adopts the form of the world (=the outside). In this theme a glimmer of Vedantic thought and 'unity of existence' [vaḥdat ul-vujūd] can be seen.

[See also {1658,4}; {1659,2}.]

FWP:

SETS
MOTIFS
NAMES
TERMS

Passion is the inside of 'that' outside-- but what or which outside? We never get an answer in so many words, but the second line tells us that 'in that direction' passion is a 'lofty/elevated realm/condition', so it's reasonable to think that it refers to a heavenly or spiritual realm.

As usual, however, the choice between us and is not indicated by Mir. When in doubt I always use us , for reasons explained here. So we could equally well choose is , to make it 'this' outside. But the rest of the line immediately makes the question feel moot: since insides and outsides are all passion, what difference does it make where we position ourselves?

In the second line, Mir uses the archaic spellings ūdhar and īdhar , so that he actually does control our readings in this case. Thus he prevents us from positioning ourselves in the lofty realm above. We are to situate ourselves in this world-- but we are to see it as made of passion.