Hi Vikas
I do not see watchdog timer being disabled anywhere in this code. What you are doing is you are clearing off the WDTOE bit everytime you write the second command i.e. WDTCR=0b00001111; rather you should write WDTCR=0b00010111;
For further understanding, I will suggest you to go through with Atmega32's datasheet and especially the WACHDOG TIMER stuff.
Hope this helps 