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, which has witnessed incidents of violence and protests over the effigy. Police also detained farmers and tribal activists who were protesting on Tuesday.
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