Question: The Supreme Lord is quoted as paraṁ satyam (the Supreme Truth). But then we see Krsna saying to Mother Yashoda that He has not eaten the clay. Is He saying a lie or is it the truth?
He is saying a lie. Krsna can lie, that we all know.
Question: But then how is Krsna called paraṁ satyam?
Yes, He is the Supreme Truth and the Supreme Truth can also lie. But the lying is only for enjoyment. So it is not that it means that the Supreme Truth is not the Supreme Truth. Krsna is still the Supreme Truth. One has to understand that Krsna comes into this world for this reason:
vināśāya ca duṣkṛtām
sambhavāmi yuge yuge
So, by this we know that Krsna comes dharma-saṁsthāpanārthāya. He comes for establishing the principles of religion. He does this all over the world and this is confirmed in the Bhagavad-gita. But when Krsna is in Vrndavana, He does something else. He comes to show His eternal pastimes and in those pastimes, He is a child. And every child lies to get out of trouble (laughter).
And why does He lie? Because it is not about dharma in the spiritual world. Dharma is in the material world because we are sinful, so we need dharma to protect us from this propensity of being sinful. This is why Lord Ramachandra comes and teaches dharma. Krsna also comes to show dharma, but not only that. He also appears to show His lilas – His pastimes. In the spiritual world, it is not about dharma, it is about rasa.
No one is sinful in the spiritual world because everyone is fully dedicated to Krsna. One who is dedicated to the Lord is automatically not sinful. This is because if one is dedicated to Krsna, then automatically he does not have to be taught the rules about not eating meat for instance, because he will automatically not do it. Why? Because Krsna is also the Lord of the animals. So in the spiritual world, no one eats meat. They are all vegetarians!
Therefore, the spiritual world is not ruled by dharma. The spiritual world is not moved by time. The spiritual world is only moved by rasa; by taste in relationship and so it is actually very sweet when Krsna is lying. Everybody knows that He is lying because it makes Him look like an ordinary child. So now the Absolute Truth has become like an ordinary child. Now He is not the all-pervading and the all-powerful, but now He is all human. And because He is so much like us, He becomes so dear to us. We cannot love the universal form of Krsna – “Many mouths and many faces, time I am.” We cannot love the destroyer of the worlds. And so, this is why He is lying, in order to make us love Him.