The 182m (600ft) high structure in the western state of Gujarat is a bronze-clad tribute to independence leader Sardar Vallabhbhai Patel.
Prime Minister Narendra Modi said the "statue of unity" would serve as a major tourist attraction.
But locals say this is as a waste of public money and that the funds could have been put to better use.
Mr Modi, who unveiled the statue at a grand inaugural event, said it is "a symbol of India's integrity and resolve."
Air Force planes showered flowers on the statue, which was designed by decorated Indian sculptor Ram V Sutar.
According to local reports, thousands of policemen have been deployed across the district, where protests over the effigy have turned violent. Police detained farmers and tribal activists during a protest on Tuesday.