HYDERABAD, INDIA -- Beneath 35 feet of murky lake water in the center of this bustling state capital rests what may be the world's tallest monolithic statue -- a brand-new, 50-foot, 440-ton granite sculpture of Buddha.

A millenium and a half ago, Buddha warned against the dangers of seeking fame and fortune in the material world. In Hyderabad today, there are those who see the city's great statue fiasco as a timely reminder of the prophet's wisdom.

The episode began when an Indian politician visited New York in 1984, saw the Statue of Liberty and decided he could do something similar. He spent five years and $3 million to chip a giant Buddha out of a mountainside, widened roads to roll the icon into Hyderabad, loaded it onto a barge to ferry it to a huge platform in Hussain Sagar Lake -- and then recoiled in horror last month when the barge tipped and the Buddha fell off, splashing into the depths.

"I worked so hard, found the rock, brought it from such a long way," said N.T. Rama Rao, who masterminded the statue operation. "I am sorry. The great saint is lost in the waters of the Hussain Sagar."

Eight people drowned in the accident. The body of one, S.K. Moondhra, the corporate project manager at ABC India Ltd. and the man who was responsible for the Buddha's transportation and welfare, was never recovered. Officials believe that Moondhra lies with the statue in a watery grave, although there is uncharitable speculation that the businessman might have swum away from the wreck, climbed to shore and gone into hiding.

Before he entered politics, Rao gained fame in India by depicting Hindu gods in the movies, and it was his sense for cinematic grandeur that apparently inspired the Buddha project. Engineering, however, is not Rao's strong suit.

Instead of constructing a tall, hollow statue from several fitted pieces, he chose to build his mammoth Buddha from solid granite, making the figure extraordinarily heavy. "He didn't realize that the Statue of Liberty is not one solid piece," said Channa Reddy, now the chief minister of Andhra Pradesh state.

Rao has an abiding fascination with statues. As head of the Andhra Pradesh state government between 1983 and 1989, he spent large sums to erect dozens in Hyderabad depicting famous figures from the region's rich political and religious history. The giant Buddha embodied for Rao an ideal of public service.

"You {Americans} have the appreciation of the liberty of the nation," he said in an interview, referring to the recent U.S. campaign to refurbish the Statue of Liberty, which is 151 feet high, excluding the pedestal. "I wanted something like that. . . . That would have been my contribution to society."

He chose to depict Buddha, a teacher and philosopher who lived in India several hundred years before the birth of Jesus Christ, because "he was a humanitarian who told the whole truth to the people. It is our pride. He was born in our country."

For more than a year, hundreds of laborers swarmed over the face of a mountainside 40 miles outside Hyderabad, chipping and hammering under the direction of a renowned local sculptor. Rao's government set to work on the roads, widening existing routes and building bypasses for the day when the statue was finished. A 15-foot concrete platform was erected in the middle of Hussain Sagar Lake, and Rao's administration let a huge contract to ABC India, a trucking firm, to handle the statue's transportation.

There were a few naysayers. Local opposition politicians from the Congress Party accused Rao of having his head in the clouds. While millions in the state suffered from poverty and unemployment, they said, the chief minister was devoting himself to irrelevant beautification projects. There were whispers, too, about corruption in the ABC India deal.

Things began to go sour for Rao even before the Buddha was ready for its unveiling. Last November, disenchanted voters booted his administration out of office in Andhra Pradesh in a humiliating defeat. Rao resigned as chief minister three months before the statue he created rolled into Hyderabad.

The first stage of the monumental undertaking went smoothly. ABC India engineers strapped the statue onto a big trailer truck and slowly moved it to the capital, stopping at the shore of the city's natural lake. After a ribbon cutting, the big Buddha was shifted to a special barge.

At dawn on March 10, the Buddha, pulled by a tug, began to move. But it traveled only about 100 yards before the barge began to list. The Buddha tipped, ripped free of its bindings and plunged into the water. The splash was so great that a boat traveling alongside capsized. The barge and trailer sank about five hours later.

In the aftermath, most of the blame has fallen on ABC India, a company specializing in land transport that critics say did not have the expertise to handle a tricky project on the water. Officials at the company won't comment in detail on the accident, citing a pending judicial inquiry. But they say they have proven their competence in dozens of similar engineering projects in the past.

"When things go right, people do not go into much detail about your accomplishments," said R.P. Shaah, ABC India's executive director. "But when things go wrong, everybody is ready to criticize."

The Andhra Pradesh government, now led by the Congress Party, is taking bids on salvage contracts, and officials say they intend to stick ABC India with the bill for a rescue operation.

Nobody knows how badly the sunken Buddha is damaged or whether it will be possible to raise the statue. Hussain Sagar Lake is so polluted with industrial and human waste that divers have been unable to get a clear view of the Buddha's condition.