A controversial Indian mining tycoon has taken over a royal palace and flown in Brazilian dancers at a reported cost of 5bn rupees (£59m) to celebrate his daughter’s wedding.

Up to 50,000 people were expected on Wednesday at the sprawling Bangalore Palace, a mock Tudor castle in southern India, to celebrate the wedding of Gali Janardhan Reddy’s daughter, who was married in a Hindu ceremony earlier in the day.

Local media criticised the extravagance at a time when many Indians are struggling to find the cash to buy food following the government’s move to pull high-value notes out of circulation in an attempt to tackle tax evasion.

But one associate defended the lavish expenditure, saying Reddy wanted people to remember the wedding of his only daughter.

Gali Janardhan Reddy, centre of the screen, with his daughter and son-in-law during the wedding. Photograph: AFP/Getty Images

“It is unfortunate that a daughter’s wedding has been made an issue out of envy and rivalry,” Manju Swamy told AFP before the party. “It’s an important moment for her parents and they wanted to celebrate the event in a way that befits the family’s status in society.”

India’s prime minister, Narendra Modi, announced last week that 500- and 1,000-rupee (£6 and £12) notes – 85% of the cash in circulation – would cease to be legal tender.

Indians can change a limited number of old notes for new ones at banks and post offices, but there have been huge queues since they reopened last Thursday after closing for a day following the announcement.

Indians rely heavily on cash for their daily transactions and those living in rural areas or who do not have bank accounts have been particularly hard hit.

People line up to change old Indian rupee notes outside a bank in New Delhi. Photograph: Rajat Gupta/EPA

The 49-year-old Reddy, a former minister with the ruling Bharatiya Janata party (BJP) in the southern state of Karnataka, spent three years in jail for his alleged involvement in a mining scam before he was released on bail last year.

Speaking to journalists in his home town last week, he refused to reveal how much he was spending on the celebrations, but said everything would be declared to the tax authorities.

Guests received their invitations on LCD devices and helium balloons featuring images of the Reddy family are reported to be floating above the palace.

While some Bangalore residents were appalled at Reddy’s obscene display of wealth at a time of cash crunch, others were sympathetic. “What’s wrong in conducting a daughter’s wedding on a grand scale? The rich and wealthy do it regularly,” said Jayaprakash Rao, a retired government official.

“Reddy is spending from his pocket and not public money,” Rao told AFP.

Indian activist T. Narasimha Murthy put the cost of the wedding at 5bn rupees, a figure that tallied with local media reports.

“Reddy has hired about 3,000 bouncers and security guards to prevent media and activists like me from barging into the venue,” said Murthy, adding he had petitioned local tax authorities to investigate.