I am executing a managed code custom action while installation, but it doesn't change the value of progressbar in setup progress dialog...

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This cannot be done with managed code. The installation progress bar can be affected only from a custom action which receives an installation handle. So a win32 DLL or VBScript.

You can find a tutorial here: http://msdn.microsoft.com/en-us/library/aa367525%28VS.85%29.aspx