Traditional milk products like khoa, paneer, ghee, dahi and shrikhand form the core value-added segment of the indigenous dairy sector, driving rural economies and food security. However, traditional artisanal methods are limited by high energy consumption, manual labor traps, quality inconsistencies and short ambient shelf lives. This comprehensive review synthesizes structural modernization pathways shifting the sector into the Dairy 4.0 paradigm. We critically analyze advanced processing technologies including pressure-driven membrane operations (Reverse Osmosis, Ultrafiltration), non-thermal physical barriers (High-Pressure Processing) and automated closed-loop systems (SCADA, PLC) alongside smart indicators and active packaging models. Sustainable solutions for waste utilization, such as whey valorization into protein powder and anaerobic biogas production, are detailed alongside machine learning algorithms for predictive texture grading. This paper maps out standard configurations to resolve commercial processing bottlenecks, establishing scalable manufacturing protocols that preserve traditional ethnic profiles while satisfying international quality and export compliance frameworks.