As you can see this pic got severely mishandled by the speedo service but I wanted to include it.
Bhuj and the -- much -- larger surroundings in Gujarat were devastated by a major earthquake in 2001. What I heard is that the major archeological sites, the scenic and friendly town center and its people, and much of the surroundings were simply obliterated. From what I hear especially the poor (including those made homeless or otherwise affected by the earthquake and now sometimes turned into slum dwellers) are still having a very hard time getting back to any decent standard of living. Bhuj still seems to be on the tourist track of visitors to this forum so maybe they can tell us what it's like.
(A search on this forum on bhuj + earthquake will yield some results including this article by AlanD from 2002, "Bhuj - Two years after E-Day": http://www.indiamike.com/india/india-travel-news-and-commentary-f80/bhuj-two-years-after-e-day-t1230/ )
As if the earthquake wasn't enough communal in-fighting, some of it extremely violent, broke out in Gujarat in the years to follow. This is hard for me to comprehend as the state had a very tolerant feel to it; sure it was proudly and perhaps puristically Hindu but there didn't seem to be many tensions towards other population groups. It seems that sadly several so-called "relief agencies" which actually figure as a front for the ends of certain communalist parties moved in after the earthquake to exploit the situation, thus aggravating any underlying tensions that may have existed, and building on some long-standing grievances (see also http://www.indiamike.com/india/showthread.php?t=579 for more detailed backgrounds). Again, I have no idea what the situation is at present; the tension seems to have largely subsided and was never likely to affect tourists at any rate, on the other hand long-lasting scars still have a long way before healing it seems.
Three (of undoubtedly countless) organizations that still seem to be active and on a grassroots, non-communalist, non-sectarian level in the area appear to be AID India http://www.aidindia.org/ , Duryog Nivaran (South Asian Network for Disaster Mitigation) http://www.duryognivaran.org/ , and the Disaster Mitigation Institute India http://www.southasiadisasters.net/ . See for yourself what you make of them.
For further backgrounds see also Wikipedia: http://en.wikipedia.org/wiki/Bhuj http://en.wikipedia.org/wiki/2001_Gujarat_Earthquake http://en.wikipedia.org/wiki/Gujarat