The 630ft statue of Chhatrapati Shivaji will be nearly 2.5 miles off the coast of Mumbai - with a price tag of £423m - and more than twice the size of the Statue of Liberty.
The ambitious project is moving forward despite criticism over its nine-figure build cost and the harm it could pose to the environment and the livelihoods of fishermen.
Prime Minister Narendra Modi has laid the foundation stone and work is expected to continue so the statue can be officially unveiled in 2019.
The statue of Shivaji will be built on 42 acres of land reclaimed from the Arabian Sea and will unseat a 503ft Buddha statue in China as the world's tallest monument.
Shivaji was a 17th century ruler and warrior king from western India who is celebrated for his leadership and successful in battle.
But the government of Maharashtra state, where Mumbai is the capital, has faced intense criticism, Al Jazeera reports.
Around 30,000 people have signed an online petition demanding the government spend the money on infrastructure and development instead of a giant memorial.
The Change.org petition states: "Apart from a waste of money, this statue is going to be terrible for the environment, for the traffic situation in South Bombay and a security nightmare."
But Mr Modi has backed the project, telling an event: "Even in the midst of struggle, Shivaji Maharaj remained a torchbearer of good governance.
"So many aspects of his personality inspire us."
Last week dozens of fishermen were arrested as they protested against the proposed memorial before Mr Modi's arrival.
In 2004 the prime minister allocated nearly £28m to build a huge monument in honour of independence leader Vallabbhai Patel.
But the ongoing project's price tag has ballooned and it is expected to cost 10 times the budgeted amount.
