In induction motor control systems driven by the indirect vector control scheme, the rotor speed is measured to determine the flux angle which is a key variable in the control algorithm. The most popular way to measure the angular velocity is the use of rotary encoder. Since the errorneous measurement of rotor speed results in incorrect flux angle estimate, the control input generated based on the faulty information should be far from the desired (correct) value and deteriorates the overall control performance. In this paper the effects of encoder fault on motor variables and control performance are analyzed by both theoretical approach and experimental study. A parity equation based on the Power is suggested and applied to detect the incipient fault of encoder.