Tell her that it is better when you have to pull it out because then you get to do more knitting!

Alternately, tell her that it isn't a baby blanket its a mourning shawl, and you have to pull it out to keep your suitors at bay until your husband returns.

Or, also, you could tell her that you are actually taking notes in secret knitting code, but noticed a typo on an important section that had to be fixed before you could report to la resistance!