The coastal hamlet of 1500 families in Kerala state was named Saddam Beach during the first Gulf War in 1991, to express solidarity with Saddam Hussein.
Saddam Beach is about 170km north of Cochin, the state's commercial hub.
"We have been praying for Saddam ever since the first Gulf War. We will now boycott all American products because our beloved leader has been captured by the US forces," said Muhammad Bashir, who heads the Saddam Hussein Voluntary Trust in the village.
Bashir said residents would not buy American products such as Coca Cola and Pepsi, as well as garments and electronic items made in the US.
"They have destroyed Iraq but Saddam will live forever in our hearts," Bashir said on Monday.
"They have destroyed Iraq but Saddam will live forever in our hearts"
Saddam had been on the run since April and his capture from a hole in the ground near his hometown, Tikrit, has infuriated his supporters here.
"We will march to the beach picking up all the US products we can gather from our houses and toss them into the sea," said Bashir.
Indian newspapers reported on Monday that posters of Saddam and the Iraqi flag were fluttering along the roadsides of Saddam Beach on Sunday.
Saddam Beach residents recently built a boat named Iraq and fishermen have named their crafts after the cities of Iraq: Basra, Karbala and Baghdad.
Kalangadan Veeran Moideen Musaliar, a village leader, said many residents had been working in Gulf countries, including Iraq, for many years.
"But ever since the war on Iraq by America, many expatriates have come back, having lost their jobs. The village economy has been ruined," Musaliar said.
A recent study by the Centre for Development Studies said Kerala has the largest number of expatriates - 1.6 million - working in the Gulf.
They have been credited with boosting the state economy in the past three decades by sending remittances worth billions of rupees every year.