Java is not allowing inheritance from multiple classes (still it allows inheritance from multiple interfaces.), I know it is very much inline with classic diamond problem. But my questions is why java is not allowing multiple inheritance like C++ when there is no ambiguity (and hence no chances of diamond problem) while inheriting from multiple base class ?
It was a design decision of Java. You'll never get it, so don't worry too much about it. Although MI might help you make Mixins, that's the only good MI will ever do you.
I have read that most programmers don't use multiple inheritance in a proper way. "Just go ahead and inherit from a class just to reuse code" is not the best practice in case of multiple inheritance.
Many programmers do not know when to use simple inheritance in most cases. Multiple inheritance must be used with caution and only if you know what you are doing if you want to have a good design.
I don't think that the lack of multiple inheritance in java (as in c++) will put restrictions in your code / application design / problem domain mapping into classes.
One simple answer is that all classes in Java derive from java.lang.Object IIRC. So, you would always have a diamond problem... :-D