I've not tried using any other usb devices as of now. What do you suggest?

try any other usb device you may have ,also go to the device manager make sure the usb controller is installed ,it will be the last one in the list .if its there but with yellow or red !, then it will need to be installed,the drivers for it will come from a motherboard disk or web site with your motherboard chipset drivers
check this link for info on the device manager
http://www.computerhope.com/win95er.htm

Unfortunately, I don't have any other usb devices with me. And yes, the usb controller is installed. Thanks, I'll go through the link and come back to you.

I checked out the link given above but could not find anything that could solve my problem

the link is just general info on using device manager ,you need to try another usb device ,go to walmart and but another usb thumb drive ,threre only 12 bucks

Jishnu, I d exactly the same problem. Tried all sorts of updates and attempts to re-install drivers and then found this solution on a web forum. It worked first time for me. the solution was to go open up the registry editor and then locate "HKEY_LOCAL MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion". Find "Device Path" in this folder and make sure that whatever is there points to "%SystemRoot%\inf" Take out anything else. When you then exit the registry and plug in the flash drive it should be recognised and either installed or you can install via device manager and update drivers. It worked for me immediately. (To be safe I would back up the registry before making the change or make a note of exactly what was there before you made the change as is always good practice when making registry changes).
Good luck - Pilgrim.