SURAT, India (Reuters) - For Jaysukhbhai Patel, a job cutting diamonds in the western Indian city of Surat was the ticket to a better life for him and his family of four. Last November, Patel's ticket expired when the small factory he worked in was shut like hundreds of others in India's diamond hub, as demand for the gems dipped in the United States and Western Europe, leaving more than 100,000 workers without jobs.

"I have worked in this industry for nearly 30 years, and I have seen many ups and downs," said Patel, father of three children who now works in a local library for less than half his previous wage of about 4,000 rupees ($78) a month.

"But I have never seen factories being shut like this."

The woes of Surat reflect a wider downturn for India's export sector, which accounts for a fifth of Asia's third largest economy. Exports have fallen four months in a row and the latest data available shows a slide of 16 percent in January.

The job losses in one of India's biggest earners come weeks before a general election that is also a potential hot potato for the Congress-led government.

During the boom years, an estimated 800,000 workers, mostly from the Saurashtra region of western Gujarat state, spent 10-12 hours a day in thousands of factories and workshops, cutting and polishing tiny rough diamonds for export.

Now mostly silent and shuttered, the factories are victims of a global financial crisis that has hit demand for the gem that defined this city for decades.

India processes about seven in every 10 of the world's diamonds, mostly cheaper stones less than a carat. Surat is the heart of the industry, built on the skills of its craftsmen, its cheap migrant labor and its legendary entrepreneurial spirit.

"People have worked hard to build this business for the last 30-40 years, but this downturn has made people risk-averse and afraid to trust their own people," said Anoop Mehta, president of Bharat Diamond Bourse, the exchange in Mumbai.

Tighter liquidity and a weaker rupee, which lost 19 percent against the dollar last year and has slipped more than 5 percent this year already, are also weighing on the industry, he said.

"What they'd earned over several years has been lost in a flash. This business runs on trust, so when payments are delayed, when orders are canceled, it shakes your confidence."

TOO LITTLE

At about $11 billion, India's exports of cut and polished diamonds is down about 3 percent so far this fiscal year from April, the Gem & Jewelry Export Promotion Council (GJEPC) said.

Several diamond units have abandoned their business entirely, installing textile machinery or taking on other work.

"I'm really excited about being a part of the jewelry trade; excited about having the opportunity to get to know more about jewelry and what makes that piece a quality one," explained Glantz. "Jewelry is such a unique way to express your individual style and taste."

Specialty jewelry stores consisting of Carlyle, Congress, and Bailey Banks & Biddle, which were acquired in November 2007, contributed sales of $74.9 million for the second quarter, as compared to $27 million for the same period last year. Same-store sales for the second quarter decreased 4.8 percent.

Researchers at the Smithsonian Institution and the U.S. Naval Research Laboratory measured the phosphorescence spectra of the 45.52-ct. blue Hope Diamond and 66 other natural blue diamonds, including the 30.82-ct. Blue Heart Diamond in the Smithsonian's National Gem Collection. They found that almost all natural blue diamonds show phosphorescence that has components of blue and red light. In some cases, including the Hope Diamond, the red color dominates, and the phosphorescence appears red to the eye; but for other diamonds, the blue color dominates.