Start your hotspot as usual. This will connect your device and the other device via a private network. The host device will have an IP Address in the same range as the connected device.
Once a connection has been established between the host device and the connecting device start a HTTP/HTTPS proxy in Every Proxy on the host device.
Once the HTTP/HTTPS proxy server is started on the host device a IP Address and Port will be displayed. Use this as the host and port while setting the proxy on the connecting device.
An example of how to set a HTTP/HTTPS proxy on the connecting Android device can be found at how to setup proxy for android.