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ok, so it seems to be a RHEL 5.4 rebuild/clone. So what you did should work for setting the timezone, but you should not necessarily expect the TZ environment variable to be set in your shell. Furthermore, if TZ was not set before you changed /etc/timezone, the is no reason to expect it to be set after you changed /etc/timezone.
Do you get the expected Calcutta time when you run date?
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