I second halfcountplus's point about the code tags, especially as it is urgent.

You were heading in the right direction with your first for loop - but it got away from you (don't you just hate it when that happens?). Use strict and warnings _and_ don't comment them out. :-)

Read up on Perl data structures, what you needed was a hash of arrays. e.g. Data Types and Variables

Good luck!

#!/usr/bin/perl 

use warnings;
use strict; 

my @country = (
 "Australia", "south","Austria","America","India","Zimbabwe"
); 

# build a table - a hash of arrays (HoA)
my %table;
foreach my $country (@country) { 
  my $init = uc substr($country,0,1); 
  push @{$table{$init}}, $country;
} 

# output the table
for my $letter (sort keys %table){
  print qq{$letter = };
  for my $country (sort @{$table{$letter}}){
    print qq{$country };
  }
  print qq{\n};
}
[download]

produces

A = America Australia Austria 
I = India 
S = south 
Z = Zimbabwe
[download]

updated: added link