Facing a tough fight for re-election, President Barack Obama on Wednesday turned the State of the Union Address into a platform to sketch a vision of US still being a world leader to convince voters to give him a second White House innings.

Unfolding an economic blueprint pledging to build on American manufacturing, American energy, skills for American workers, and a renewal of American values, Obama vowed to take US away from outsourcing, bad debt and phony financial profits, which could be bad news for Indian companies.

Obama in his third State of the Union Address, Obama offered both his administration's priorities for the coming year and his campaign messaging for his re-election bid in November.

He defended a long list of his trademark policies -- tax increases on the wealthy, Wall Street reform, health care reform, government stimulus spending and offered proposals of interest to Republicans, like corporate tax breaks and expanded oil and gas development.

"Yes, the world is changing; no, we can't control every event. But America remains the one indispensable nation in world affairs – and as long as I am President, I intend to keep it that way," Obama said.

He called for increase on tax on the rich, penalising companies indulging in outsourcing and shipping jobs overseas and offering a new potential solution to homeowners who are struggling to refinance their home loans.

In his primetime televised speech which lasted over an hour, the US President targeted the American middle class; one of the worst sufferers of economic downturn.

Recalling the success of his administration's efforts to combat terror, Obama said the momentum of Taliban has been broken and remaining al Qaeda operatives in Afghanistan and Pakistan are scrambling to escape from the US' reach.

This decisive blow against these extremist organisations has been mainly because of the focused approach and end of war in Iraq, he said.

"Ending the Iraq war has allowed us to strike decisive blows against our enemies. From Pakistan to Yemen, al Qaeda operatives who remain are scrambling, knowing that they can’t escape the reach of the United States of America," he said.

"From this position of strength, we have begun to wind down the war in Afghanistan. 10,000 of our troops have come home. 23,000 more will leave by the end of this summer."

"This transition to Afghan lead will continue, and we will build an enduring partnership with Afghanistan, so that it is never again a source of attacks against America," he said in his speech to the US Congress. Turning his attention to pressing domestic domestic issues, Obama vowed to build an economy that is just from 'top to bottom'.

"We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules," Obama said.

"In 2008, the house of cards collapsed. We learned that mortgages had been sold to people who couldn't afford or understand them. Banks had made huge bets and bonuses with other people's money. Regulators had looked the other way, or didn't have the authority to stop the bad behaviour," Obama said.

"It was wrong. It was irresponsible. And it plunged our economy into a crisis that put millions out of work, saddled us with more debt, and left innocent, hard-working Americans holding the bag. In the six months before I took office, we lost nearly four million jobs. And we lost another four million before our policies were in full effect," Obama said.

Obama said that the state of the US union was 'getting stronger,' defending his policies by saying "we've come too far to turn back now."

"The state of our Union is getting stronger," Obama said. With unemployment still above 8 per cent and economic uncertainty lingering, Obama framed the challenges facing the country as a choice between opportunity for some or giving everyone a chance to prosper.

"What's at stake are not Democratic values or Republican values, but American values. We have to reclaim them," he said.

Obama attributed this to policies of the previous administration. "Long before the recession, jobs and manufacturing began leaving our shores. Technology made businesses more efficient, but also made some jobs obsolete. Folks at the top saw their incomes rise like never before, but most hardworking Americans struggled with costs that were growing, paychecks that weren't, and personal debt that kept piling up," he said.

Advocating his case of taxing the rich, Obama had invited the Secretary of Warren Buffet to sit along with the First Lady. Obama said she pays more tax percentage that her boss.

"Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else – like education and medical research; a strong military and care for our veterans? Because if we’re serious about paying down our debt, we can’t do both," Obama said.

"Tax reform should follow the Buffett rule: If you make more than USD 1 million a year, you should not pay less than 30 percent in taxes," said the US President.

"You're the ones struggling with rising costs and stagnant wages. You're the ones who need relief," he said.

"Now, you can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense," Obama said.

He proposed radically shifting the US economy back to a manufacturing base after decades of ceding jobs in goods production to factory-heavy countries such as China. He vowed to wrest production from rivals such as China and burnish the 'Made in USA' label.

Obama said one of his proudest possessions is the flag that the SEAL Team took with them on the mission to get Al-Qaeda chief Osama bin Laden.

"There are no Americans fighting in Iraq. For the first time in two decades Osama bin Laden is not a threat to this country," the president said.

Obama hailed the demise of Libya's Muamamr Gaddafi and warned Syria's Bashar al-Assad his regime's days were numbered as he vowed enduring US support for the ideals of the Arab Spring.

"As the tide of war recedes, a wave of change has washed across the Middle East and North Africa, from Tunis to Cairo; from Sanaa to Tripoli," Obama said.

"A year ago, Gaddafi was one of the world's longest-serving dictators -- a murderer with American blood on his hands. Today, he is gone. And in Syria, I have no doubt that the Assad regime will soon discover that the forces of change can't be reversed, and that human dignity can't be denied."

While noting it was unclear how events in the Middle East and North Africa would unfold, Obama said he would continue to 'stand against violence and intimidation' and support democratic ideals.
"How this incredible transformation will end remains uncertain. But we have a huge stake in the outcome," he said.

"We will support policies that lead to strong and stable democracies and open markets, because tyranny is no match for liberty."

He said the US is determined to prevent Iran from getting a nuclear weapon and no option is off the table against Tehran. At the same time, he noted that a peaceful resolution of this issue is still possible.

The President said his administration will safeguard the US' own security against those who threaten its citizens, friends, and interests.