Indy

I too, have trouble defeating the Kraken but the way I do it is to grab the super speargun and the demo charges.

Once you have these items, dive into the water, swim close to those little orange jellyfish like creatures and let them attach to you, once about 5 are attached to you swim to a pillar and place a demo charge on it, then swim away or downwards and the pillar will break. Do this for all 4 pillars and they will fall and trap the kraken.

Hope you can defeat it and don't give up.