Found a great way to debug python scripts interactively using pdb aka Python Debugger. It is similar to gdb used on *nix.
Essentially you import pdb
in the beginning of the script, and wherever you need to start debugging, add following statement :
pdb.set_trace()
Now you execute the script from command line, and execution will stop where you have added set_trace() call. You are presented with pdb prompt. There after it is similar to gdb commands.