Hi Kavish,
The 32GB disk storage you are referring to is for the temporary disk, usually D: drive on Windows VM. It has nothing to do with your Standard SSD LRS 128GB disk you have in your last screenshot.
Provided you are not storing important files on the temporary disk (you should only put temporary files that are okay to delete there), you can go ahead and resize the VM to Standard D4s_v3.
Please click Accept Answer and upvote if the above was helpful.
Thanks.
-TP