Russia have progressed to the quarter-finals while India would yet again strive in the play-offs to re-enter the 16-team World Group.
India were playing in the World Group for the first time since their 1998 appearance.
For India, everything depended on Somdev's first reverse singles but the gritty Indian was no match to sheer class of world number 13 Youzhny.
In a must win situation, Somdev was outclassed 2-6, 1-6, 3-6, which ended India's hopes and later Rohan Bopnna recorded a consolation 7-6(5), 6-4 win over Teimuraz Gabashvili in the dead fifth rubber.
In complete contrast to India's play-off tie against South Africa where they won all the singles matches, India lost all the singles match in this tie.
Leander Paes and Mahesh Bhupathi saved India a whitewash by winning the doubles rubber against Igor Kunitsyn and Gabashvili on Saturday.
Russia have levelled the head-to-head scores 2-2 between the two nations.
After taking a decisive 3-1 lead, the hosts pitted Gabashivili in the inconsequential rubber in place of Kunitsyn and ended the tie on a losing note.
The 416-ranked Bopanna, who has earned a nick-name 'Bofors' for his booming serve, played well in the second reverse singles against a player who is ranked as high as 106.
Bopanna served well, volleyed brilliantly and was good at the net in the one hour 20 minutes contest.
He squandered a set point in the opening set before sealing it in the tie- breaker, where he was trailing 0-3 at one stage.He put up a much better show in the second set and broke Gabashvili in the fifth game to take decisive lead.
Earlier, coming into the first reverse singles in a pressure-cooker situation, Somdev learnt a good tennis lesson from a superior player.
It was first meeting between Somdev and Youzhny and the class difference between the two players was glaring. The Russian conceded just six games in the lop-sided match that lasted one hour and 55 minutes.
Somdev put up a good fight in the third set but Youzhny was too good for him.
Youzhny showed why he is top-15 player as he never let Somdev play his style of game from the baseline. He in fact took advantage of it. Somdev had no answer to Youzhny's solid ground-strokes and smart drop volleys.
The Russian attacked Somdev's weak second serve and set up and took points at will, executing a perfect gameplan.
In no time Somdev was down by two breaks -- third and fifth games -- and the Russian comfortably placed with a 5-2 lead. Youzhny served out the first set with a drop volley in just 31 minutes.
Somdev, who had never bothered about the rankings of his opponents, looked helpless against Youzhny who toyed with the Indian.
Such was the control and domination of the Russian over his opponent that hardly an unforced error came off Youzhny's racquet.
Whenever Somdev tried to engage Youzhny in a long rally, the Russian would come with a big stroke or a smart volley, leaving the Indian reach for the ball.
Somdev's misery grew all the more in second set as he could not get on the board till the fifth game. And that was the only game he could win on his serve in that set.
Somdev tried to do something different in the third set as he changed his tactics and approached the net more often but Youzhny had all the answers and was not troubled at all.
It did look like a contest in the third set and the fourth game saw the most fierce fight for points.
Somdev saved quite a few breakpoints but it was the Russian who ran away with the game to create a 3-1 lead.
The Indian though hung in and after one hour and 34 minutes for the first time Youzhny was down a breakpoint. The Russian held after saving two breakpoints but had to sweat it out this time.
Somdev fought with his never-say-die spirit but that merely delayed Youzhny's win.