While declining real product prices faced by primary commodity producers was one of the central causes of rising farm indebtedness, the gradual shrinkage of formal credit institutions in rural areas has simultaneously caused increasing dominance of private players in the credit market, rendering producers all the more vulnerable. A class analysis of householdlevel farm production data from two states reveals the pattern of income depression and rising indebtedness in rural areas. The deleterious implications these processes have for future agrarian development call for effective price stabilisation operations and a comprehensive debt-relief policy in the short run.