Induction motor is very much used in mild hybrid vehicles because of its low cost, rugged structure and reliability. To test the induction motor controller in hardware-in-the-loop (HIL) simulation environment efficiently in both motoring and generating modes, generally, an instantaneous dynamic model of induction motor drive is used which requires the instantaneous values of PWM signals of inverter switches and hence a very high sampling frequency of about twenty times the switching frequency is required to effectively capture all the switching information of MOSFETS. This requires a HIL system with very powerful processor which increases the overall cost of system. In this paper, a dynamic average-value model of induction motor drive is developed in MATLAB/Simulink which requires only the duty cycle information instead of instantaneous switching information of PWM signals. Its performance is compared with the instantaneous model which is also developed in MATLAB/Simulink. At different operating conditions, it is shown that the waveforms of motor torque, phase current etc. of average-value motor drive model trace those of instantaneous model even if the sampling frequency of average-value model (10 kHz) is twenty times lesser than that of instantaneous model (200 kHz) for the PWM switching frequency of 10 kHz. Hence, by using the developed average-value induction motor drive model, the cost of HIL system can be drastically reduced. Further, HIL simulation is performed with the average-value motor drive model executed on dSPACE DS1005 processor board using DS2211 I/O board and the motor controller to validate the proposed average-value model.