India is in a grouping called Quad which involves multi nations and intelligence is shared between them.
India need not do tit for tat, there are other means.
Srilanka is in a dire situation and so it allowed the ship.
The ship poses a threat to India because most of the nuclear facilities, missile testing ranges and defense manufacturing lies in south India and this ship can collect data.
Also it can tap into important communication networks and steal meta data.