Micro, Small and Medium Enterprises (MSMEs) have shown a spirited performance in employment generation, use of traditional skills and technologies and ensuring balanced economic growth by reducing regional disparities., The paper is an attempt to analyse how far the MSMEs have been able to reduce regional disparities with the help of key parameters namely number of units, employment, original value of investment, market value of investment and gross output. The study is divided into two parts- analyzing the rural-urban and sector wise distribution of MSMEs. The study is based on secondary data which has been collected from the census report on the MSMEs with the base year 2006-07. The study results show significant heterogeneity among the MSMEs in both rural-urban and sector-wise distribution. The percentage of MSMEs situated in the urban areas is considerably high though the MSMEs in rural areas are found to be more employment intensive and productive. Regarding sector wise distribution, micro enterprises play the dominant role in terms of number and employment generation as the number of small and medium enterprises is significantly low. This heterogeneity in the MSME sector is a major reason for poor economic development in rural and backward areas. The Govt. must ensure proper infrastructural development, technological upgradation, assistance for domestic marketing and export and special facilities for the MSMEs in backward areas to encourage more and more MSME entrepreneurs to set up their unit in the backward areas.