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Some options:

1. Legal: Halal process of bleeding the animal is painful to animals

2. Legal: Legislative privilege

3. Illegal: Freedom of religion

4. Partly legal and partly illegal: Allow for butcher shops and packaged meat, disallow on products like candy or perfumes or soft drinks (where Halal stickers are meaninglessly placed to attract Muslims consumers).

5. Alternative solution: Meat must compulsorily be labelled either Halal or Jhatka (Sikh method of killing animals with one stroke to save prolonged pain).

6. Other
Option 4 based on what you've suggested above. If the interest of the animals comes into the picture, perhaps halal without stunning the animal would be banned, as in several European countries
Actually, there is a logic behind the ban. Halal itself is not banned, only labelling is. A lot of non-halal meat is labelled halal to fool Muslims into buying it. The answer is to remove all halal labels. Instead, Muslims can directly buy from slaughterhouses which practise halal.

On another note, I feel this halal concept is alien to Indian Muslims. It is a practice promoted by the orthodox Arab clergy and exported worldwide. I don't think the average Muslim cares.
then you are wrong, it is a basic tenet of their faith, a lot of things are exported but this is not.
it is also a basic tenet of their faith to pray in public spaces. what is your home address btw? I need to pray 5 times in front of it.
None of the above, I would challenge it on jurisdictional ground. Under the FSS Act only FSSAI has the power to ban or not in relation to food products, UP Govt or any other state has no power. Under what authority has this ban order been issued?