“No mouse support: mouse=a” error in vim

I am running a particular script and getting the following error :

  Error detected while processing /home/subhrcho/.vimrc:
  line   42:
   E538: No mouse support: mouse=a

This is the relevant portion of .vimrc file :

" In an xterm the mouse should work quite well, thus enable it.
 set mouse=a

Any idea as to what is wrong ?

P.S: I am using the following version of vim

VIM – Vi IMproved 7.0 (2006 May 7, compiled Nov 12 2010 05:24:19)
Included patches: 1, 3-4, 7-9, 11, 13-17, 19-26, 29-31, 34-44, 47,
50-56, 58-64, 66-73, 75, 77-92, 94-107, 109, 202, 234-237

And my platform is :

Red Hat Enterprise Linux Server release 5.8 (Tikanga)