The first verse of the Isha Upanishad provides the basis for the Gita’s response, in essence: “All this is for habitation by the Lord, whatsoever is individual universe of movement in the universal motion.”
This Upanishad indicates, as is also described by the Gita, that all the individual forms in the universal manifestation are essentially embodiments of the Supreme. Therefore, the basic concept of the Supreme Lord taking a human form, which is the underlying premise of the Avatar, is already seen as the basic mechanism of the entire creation!
The next question then comes to the apparent imperfection of the creatures versus the unlimited knowledge, power, and pervasiveness of the Creator.
Sri Aurobindo discusses the issue: “The assumption of imperfection by the perfect is the whole mystic phenomenon of the universe; but the imperfection appears in the form and action of the mind or body assumed, subsists in the phenomenon,–in that which assumes it there is no imperfection, even as in the Sun which illumines all there is no defect of light or of vision, but only in the capacities of the individual organ of vision.”
The question of the supracosmic Ruler is addressed next: “Nor does God rule the world from some remote heaven, but by his intimate omnipresence; each finite working of force is an act of infinite Force and not of a limited separate self-existent energy labouring in its own underived strength; in every finite working of will and knowledge we can discover, supporting it, an act of the infinite all-will and all-knowledge.”
The basic standpoint of the Gita starts from the infinite and universal and from thence views the finite forms that make up the creation, and as has been noted earlier, this is the opposite of our normal human conception, wherein we see ourselves as separate and distinct forms without recognising the Oneness and the First Cause of our existence.
Sri Aurobindo concludes: “Therefore none of the objections opposed by our reason to the possibility of Avatarhood can stand in their principle; for the principle is a vain division made by the intellectual reason which the whole phenomenon and the whole reality of the world are busy every moment contradicting and disproving.”
Sri Aurobindo, Essays on the Gita, First Series, Chapter 15, The Possibility and Purpose of Avatarhood, pp. 143-144