Police in northern India have arrested three men and are searching for at least four more after two teenage girls were found hanged from the branches of a mango a tree after being gang-raped.

A postmortem indicated that the cousins, aged 14 and 15, hanged themselves after being repeatedly assaulted by a group of local men in their village, in the Budaun district of the huge, poverty-stricken state of Uttar Pradesh.

The social stigma attached to being a rape victim in conservative India frequently leads to suicides. Earlier reports suggested the victims had been strangled.

The incident provoked angry demonstrations locally, and outrage elsewhere in the country. "It is a gruesome, barbaric act. The whole nation has been up against this but every day there is this kind of problem," said Ranjana Kumari, director of the Centre for Social Research and a women's rights activist.

Indian TV channels showed footage of the villagers sitting under the girls' bodies as they swung in the wind, preventing authorities from taking them down until the suspects were arrested.

The bodies had been found on wednesday morning, hours after the two teenagers had disappeared from fields near their home in the village of Katra, 150 miles from Delhi, Superintendent Atul Saxena said.

Around half of India's 1.25 billion inhabitants do not have access to a toilet. Women are vulnerable to assault because they use fields around villages before sunlight and after sundown instead.

Family members named two policemen who they said had taken part in the assault and accused others of refusing to take action when they complained of repeated harassment of the two women. They also accused the head of the local police station of ignoring a complaint by the girls' father on Tuesday night that they were missing. He has since been suspended. Three men have now been arrested, including two police officers.

The victims were from the Dalit community, who are at the bottom of the tenacious caste system of social hierarchy, and are subject to widespread discrimination.

"The report suggests antemortem hanging, which means the girls probably committed suicide," said Saxena, the police chief.

India tightened its anti-rape laws last year, making gang-rape punishable by the death penalty. The new laws came after protests over the fatal gang-rape of a 23-year-old woman on a moving bus in New Delhi in December 2012.

That incident led to an unprecedented national debate and calls for widespread changes in cultural attitudes as well as policing and legal reform.

The six men identified as the woman's attackers were all born in poor, deeply conservative, lawless rural areas and had then travelled to Delhi in search of work. Four men and a juvenile were eventually convicted. A sixth, the ringleader, hanged himself in prison.

Records show rising incidences of rape in India. Activists say that true number of assaults is much higher than suggested by official records because of an entrenched culture of tolerance for sexual violence, which leads many cases to go unreported, and the social stigma which victims suffer.

Women are often pressed by family or police to stay quiet about sexual assault, experts say, and those who do report cases are often subjected to public ridicule. Problems are particularly serious in UP, said Kumari. Governance is weak and policing patchy in much of rural India, where 70% of the population live.

Earlier this week, a teenager was raped and set on fire in a village in the state. The incident was barely reported locally. "Sadly you must expect this given the attitude of the people in charge there," Kumari said.

Last month, the head of UP's governing party told an election rally that he opposed to the law calling for gang-rapists to be executed. "Boys will be boys.They make mistakes," Mulayam Singh Yadav, who is also father of the state's chief minister, said.

Earlier this year, a young girl was gang-raped in a remote village in West Bengal state on orders from tribal village elders who objected to her relationship with a Muslim man. In another incident in West Bengal last year, a girl was gang-raped twice, and then killed, by the same group of men. The second assault reportedly occurred as she returned home from the police station where she had registered a criminal complaint naming her attackers.

A series of attacks on tourists – and the attention focused on the problem by the Delhi gang-rape of 2012 – has hit overseas visits to India. The causes of the wave of sexual violence – and its extent – are hotly debated.

Many commentators say it is a consequence of the efforts of a growing number of women, even in remote areas, to claim basic freedoms denied for centuries. Others point to India's acute gender imbalance, controversial caste system and entrenched patriarchal culture. Conservatives have blamed "western influences", women's clothing and even fast food.

Data from a recent study by WaterAid (pdf) suggests around a third of Dalit households reported women had experienced some form of assault or harassment simply while trying to collect water.

"This vicious, horrifying attack illustrates too vividly the risks that girls and women take when they don't have a safe, private place to relieve themselves. Ending open defecation is an urgent priority that needs to be addressed, for the benefit of women and girls who live in poverty and without access to privacy and a decent toilet," said Barbara Frost, WaterAid's Chief Executive.