Diamond polishers at work in Surat, India.
Diamond polishers at work in Surat, India. - 
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KAI RYSSDAL: You need jewels to go along with all those fancy clothes Bendel's used to sell. There is, though, a tendency to cut back on the bling when the economy's sour.

The $65 billion global diamond industry has been hit pretty hard. Prices have fallen by a third since last August. And that has taken the sparkle out of a lot of the economies where diamonds are mined. De Beers, the world's biggest diamond producer, announced this week its output is down 91 percent. Which means it's also bad news for India, where almost three-quarters of the world's diamonds are cut and polished. Raymond Thibodeaux reports.

Raymond Thibodeaux: The city of Surat in western India is the heart of the country's diamond industry. It's highly skilled and relatively cheap workforce has made India No. 1 in the diamond processing business.

In Surat's diamond market, buyers and tourists usually swarm the narrow streets, hunting for deals in hundreds of ramshackle mom-and-pop diamond shops. But these days, many of the shops have closed. So have the factories that cut and polish the rough diamonds. Analysts say Surat's revenue from the diamond industry is expected to fall by a quarter this year. K.K. Sharma is executive director of the Surat Diamond Institute.

K.K. Sharma: Everything started with the economic crisis in the United States. The first industry affected was the luxury industry. And since a diamond is a luxury item, it was hurt the most.

Sharma says many diamond merchants are having trouble paying their suppliers.

Sharma: A lot of people defaulted on their payment terms. And because of that, Indian manufacturers were in a liquidity crunch -- with heavy stocks, with no money, with no fresh orders. They had to close down their units.

They also had to lay off more than 200,000 people -- more than half the industry's workforce. India's diamond trade lifted millions of Indian families out of poverty, but it's an escape route no more.

Kanu Balar: Now, there is no work.

Diamond trader Kanu Balar says he's never seen so many workers so desperate for jobs.

Balar: There are problems. After three, four months, many people are [committing] suicide because of the problems.

If you lose your job in this one-time boomtown, you still have to cope with the high cost of living here -- for housing, and health care and for school fees. Authorities say that since the industry crisis began, more than 70 laid-off diamond workers have committed suicide.

That's Pushba Jadav, whose husband, Kalpesh, was laid off in October after nine years as a diamond polisher for one of India's biggest diamond exporters.

Pushba Jadav: We were doing good until Kalpesh lost his job. For us, everything changed after that.

Pushba says her husband couldn't find other work. Their savings dwindled, the debts piled up and, three months after he was laid off, Kalpesh drowned himself in the Tapi River that loops around this so-called Diamond City. Diamond industry leaders here say such tragedies are part of the human cost of the global economic crisis. They are calling on the Indian government to bail out the industry and to do it soon.

In Surat, I'm Raymond Thibodeaux for Marketplace.