It is porcelain, not paint. Most likely, the porcelain chipped & then steel uncovered at the chip started to rust. Many people just rub some cooking oil or mineral oil on it to prevent further rusting. Doing it every once in a while before a cook will basically help "season" the oil so you get a bit longer protection.
Others have tried using some high heat paints in the appropriate color. If memory serves, many indicate that the paint often turns black if the kettle becomes too hot.
Hopefully someone else comes along soon with more direct knowledge.