As you know water, electronics and electricity are not a good mix.
The impurities in the water causes corrosion and provides circuit paths for the electricity which were not in the player’s operating design and could damage the components. The corrosion starts immediately and is ongoing until it has been properly cleaned away.
First do not try to turn on or charge your player and then remove the battery as soon as possible from the player to minimize any further damage.
Then you need to dis-assemble the rest of the player and clean all the affected parts using Isopropyl Alcohol 99%+ (available at electronics parts stores) to remove all traces of corrosion etc. Do not use "rubbing alcohol" as in some cases this is only 70% IPA or less, can contain additives and is not as effective. If you do check the label to verify the amount of IPA. The higher the percentage of IPA the better.
Here is a link that describes the process.
Electronics Water Damage
As always with electronics, especially surface mounted PCBs be gentle when handling and especially when brushing away the corrosion. You do not want to remove any components from the board. You may also have to remove any shields covering the CPU etc as water may have got in under them.
Hopefully after you have done all this and replaced the screen assembly (it cannot be repaired) the player might possibly work correctly again,
Replacement parts are available online. Just search for iPod Touch 7th Gen LCD screen, touch digitizer screen assembly to get results for suppliers
Here’s the ifixit iPod Touch 7th Generation Repair guide that may help.
If this process seems too daunting, take your player to a reputable, professional electronics or mobile phone repair service, experienced in liquid damage repair and ask for a quote for a repair. If you decide to do this, do it sooner than later.